Evelo Biosciences, Once Valued at $2 Billion, Shuts Down Following Clinical Failures and NASDAQ Delisting

After a month of seeking strategic alternatives, Flagship Pioneering-incubated microbiome therapeutics company Evelo Biosciences announced its closure. The company’s website has been cleared of all content, retaining only a portal to its SEC regulatory filings.

Evelo’s collapse is inextricably linked to the failure of its lead drug candidate, EDP1815, to meet the primary endpoint in Phase II clinical trials for atopic dermatitis. Over the past 18 months, Evelo has encountered a series of setbacks. In filings with the U.S. Securities and Exchange Commission, the company stated that if it failed to secure funding or identify alternative means to continue operations, the board of directors considered dissolution to be the only viable option. With this final outcome, CEO Simba Gill and CFO Marella Thorell will depart the company along with the seven members of the board of directors.

Evelo Biosciences is a microbiome therapeutics company incubated by the prominent venture capital firm Flagship Pioneering, dedicated to developing oral microbial therapies for the treatment of inflammatory diseases, including psoriasis, atopic dermatitis, arthritis, and asthma.

Evelo was founded in 2015 and merged in 2016 with Epiva Biosciences, another company incubated by Flagship. It raised a total of $213 million in primary market financing, with participation from Mayo Clinic, GV, and Celgene. In May 2018, Evelo went public on the Nasdaq, reaching a peak market capitalization of $2 billion.

Evelo’s technology is based on the hypothesis that “the gut microbiota modulates the systemic immune system.” Evelo collects microbial strains from the fecal samples of healthy individuals and patients, uses in vitro models to test and simulate the interactions between microbes and the human immune system, and evaluates the immunological activity of the strains. The selected strains are processed through fermentation and other manufacturing steps into lyophilized powder, which is administered orally via capsules.

Evelo’s pipeline consisted of three products—EDP1815, EDP1867, and EDP2939—all formulated as single-strain microbial therapeutics. These strains had previously demonstrated “the potential to confer specific pharmacological properties” in earlier studies. Evelo aimed to validate that orally administered microbial strains could modulate immune pathways by either upregulating or downregulating them. However, all final drug candidates ultimately underperformed.

In April 2022, EDP1867 failed to demonstrate evidence of efficacy in its Phase 1b clinical trial, leading to the suspension of the project. Additionally, two other products, EDP1815 and EDP2939, yielded unsuccessful results in multiple Phase II clinical trials conducted after 2022.

In February 2023, Evelo updated the Phase II clinical trial results of EDP1815 for the treatment of atopic dermatitis. The study failed to meet its primary endpoint in Phase II, with efficacy even inferior to that of placebo, which ultimately became the final blow to Evelo.

Based on the trial results, the EASI-50 response rate (defined as a ≥50% improvement in the Eczema Area and Severity Index score for atopic dermatitis) in the control group (placebo group) was 56%. In contrast, only 41%, 38%, and 32% of patients in Cohorts 1, 2, and 3 of the EDP1815 group, respectively, achieved an EASI-50 or greater response at Week 16, with substantial geographic variation observed in these data. In other words, the absolute efficacy in the trial cohort with the poorest outcomes was 24 percentage points lower than that of the placebo group.

This data caused Evelo’s stock price to plummet by 50% on the same day. Although Evelo announced that it would re-examine the data and investigate the reasons for the pronounced placebo effect, further updates to the EDP1815 clinical trial data in April 2023 showed that in Cohort 4, 37.9% of patients in the EDP1815 group achieved an EASI-50 or greater response at Week 16, compared with 44.7% in the placebo group.

Due to its stock price trading below $1 for an extended period, Evelo also received a delisting warning from Nasdaq in March of this year. In the announcement, Dr. Simba Gill, CEO of Evelo, stated that in light of the results from earlier clinical trials, the company will discontinue further development of EDP1815 for the treatment of atopic dermatitis and concentrate resources on its first candidate drug based on its next-generation extracellular vesicle platform, the EDP2939 program.

Notably, this July, Flagship led Evelo’s latest round of private financing. One of the key uses of the raised funds was to support the Phase IIa clinical trial of EDP2939. Regrettably, EDP2939, which had been highly anticipated, still failed in its Phase II clinical trial for the treatment of psoriasis.

During this period, Evelo also implemented layoffs to cut costs. It is reported that Evelo laid off 45% of its workforce in January 2023 and conducted further layoffs in the second quarter. However, neither the pipeline adjustments nor the staff reductions ultimately reversed the situation.

Evelo was not the first Flagship-spawned company to announce its closure.

In April 2022, Kaleido Therapeutics, another star company in the microbiome therapeutics sector, declared bankruptcy and was delisted from the NASDAQ. Also incubated by Flagship Pioneering, Kaleido was founded in 2015 and went public on the NASDAQ in 2019. However, a series of clinical trial failures subsequently led to a continuous decline in its stock price.

Furthermore, in February 2023, the red blood cell therapy company Rubius Therapeutics declared bankruptcy. Incubated by Flagship Pioneering and founded in 2015, Rubius was dedicated to developing therapies based on bioengineered red blood cells, with an initial focus on rare diseases, cancer, and autoimmune disorders.

In March 2023, exosome-based pharmaceutical company Codiak BioSciences also filed for bankruptcy. Incubated by Flagship Pioneering and founded in 2015, Codiak’s core technology was derived from the research of Raghu Kalluri, Director of Cancer Biology at The University of Texas MD Anderson Cancer Center.

Flagship is an incubation platform that drives innovation in the biopharmaceutical sector through a systematic approach to entrepreneurship. Since its inception, it has launched and incubated more than 100 innovative companies spanning biopharmaceuticals, information technology, agriculture, and energy, with a combined valuation exceeding $140 billion.

Under the current circumstances, Flagship Pioneering’s portfolio companies are facing certain challenges. The root cause lies in the fact that these ventures are all at the forefront of biotechnology, possessing significant breakthrough potential. However, given the prevailing external environment, the market favors companies with late-stage pipelines or even commercially launched drugs, leaving frontier technology firms under considerable financial pressure.

For instance, the direct cause of bankruptcy for three companies—Evelo Biosciences, Codiak BioSciences, and Rubius Therapeutics—was financial pressure, which further led to slow pipeline progress and low capital efficiency. For example, Rubius Therapeutics, a red blood cell therapy company, did not initiate clinical trials for its first RCT candidate drug until late 2020, while Codiak BioSciences’ research pipeline never advanced to late-stage development.

Meanwhile, the performance of Flagship Pioneering’s portfolio companies has varied significantly. As a star company in the field of microbiome therapeutics, Seres Therapeutics’ flagship product, SER-109, has been designated by the FDA as both a Breakthrough Therapy and an Orphan Drug for the treatment of Clostridioides difficile infection, and has already received marketing approval.

This blockbuster drug also encountered failure in Phase II clinical trials, but Seres did not abandon SER-109, instead continuing to place high hopes on it. Ultimately, SER-109 achieved a remarkable turnaround: the oral microbiome therapy Vowst (SER-109) received FDA approval for marketing to prevent recurrence of Clostridioides difficile infection (CDI) in adults aged 18 years and older. This marks the first FDA-approved oral fecal microbiome therapy and the only drug to successfully break through in this therapeutic area, representing a significant milestone in the development of microbiome-based therapies.

Dr. Noubar Afeyan, Founder and CEO of Flagship, has stated that innovative scientific research requires enduring continuous setbacks and accumulating experience to achieve brilliance.

In the current industry cycle, the ability to accurately grasp one’s own development direction and the determination to persevere often determine whether a product ultimately achieves success and whether an enterprise can sustain its survival.