Eleven Biotherapeutics: A Buyout Likely Coming

| About: Eleven Biotherapeutics, (EBIO)


Management is exploring strategic alternatives, including a sale of the company.

Maximizing shareholder value is its goal.

Over 40% of the outstanding common stock is owned by those affiliated with the company, such as those on the Board of Directors.

Eleven Biotherapeutics, Inc. (NASDAQ:EBIO) recently presented preclinical and Phase 3 clinical data at the Annual Meeting of the Association for Research in Vision and Ophthalmology (ARVO). These presentations served as an important opportunity for the company to gather interest among other companies in its research, thereby leading towards the strategic alternatives it has been evaluating, including partnerships or the sale of the company. With a proprietary platform, an investigational new drug application submission due anytime this quarter and invaluable research, EBIO is a strong candidate for a buyout.

Management has a record of buyouts

Abbie Celniker, Ph.D., President and Chief Executive Officer of Eleven Biotherapeutics, has a rich history of serving in leadership roles in biopharmaceutical companies. This includes her positions as the President, CEO, and as a member of the board of directors of Taligen Therapeutics, Inc. While in her said capacity, Taligen was acquired by Alexion Pharmaceuticals (NASDAQ:ALXN) for an upfront payment of $112 million for all of Taligen's equity interests. "Additional contingent payments of up to an aggregate of $367 million would be due upon reaching various clinical efficacy and product approval milestones in both the U.S. and European Union for up to six product candidates."

Taligen was a lot like Eleven Biotherapeutics - a proprietary platform, extensive research and patents. And without any product that had passed Phase 3 clinical trials, it still sold with a hefty price tag. If Eleven Biotherapeutics were to receive a similar offer this would equate to about $5 per share, without any additional contingent payments which could occur with further progress on EBI-031, its most advanced preclinical product candidate to treat Diabetic Macular Edema and Uveitis.

Besides Abbie Celniker's connections to large companies, John McCabe, CFO, was Vice President of Finance at Clinical Data, Inc., a drug developer that was acquired by Forest Laboratories.

We can glean from this that management knows how to deal with being acquired and has the networking ability to make the strategic alternatives it is seeking come to fruition.


Eleven Biotherapeutics presented data regarding its Phase 3 clinical trials for isunakinra (EBI-005), which failed to show statistically significant difference from the placebo at 12 weeks. Although the failed Phase 3 clinical for isunakinra was a disappointment in not being able to meet its primary endpoint, a failed clinical trial is still very valuable to other researchers. Why? It provides data to those researchers on what doesn't work, what may work, and saves them time and money from pursuing an identical study. As Thomas Edison said, "Negative results are just what I want. They're just as valuable to me as positive results. I can never find the thing that does the job best until I find the ones that don't." If this data was not important, why would three posters on a failed Phase 3 clinical trial be selected for presentation at "the largest gathering of eye and vision researchers in the world?"

Despite the setback, isunakinra was found to be generally safe and well tolerated and though the primary endpoint was not met, subjects did show an improvement from baseline. In fact, compared with the vehicle group, isunakinra showed an increase in the percentage of patients showing improvement in the OSDI (Ocular Surface Disease Index) endpoint and the CFS (Corneal Fluorescein Staining) and OSDI combined endpoint in the time period from 3 months to 6 months. Eleven Biotherapeutics believes "there may be an opportunity to look at longer-term treatment with isunakinra to better understand how the disease severity changes and responds to treatment over time. In addition, we believe that looking at specific patient populations and different metrics will continue to be important in the treatment of dry eye because of the heterogeneity of the disease." This was further supported by post hoc analyses by Interleukin Genetics, Inc. (OTCQB:ILIU), which reported that patients with certain genetic patterns were more likely to respond to isunakinra.

While Eleven Biotherapeutics has ruled out further studies for isunakinra currently to focus on its lead product candidate, EBI-031, a company wishing to acquire EBIO will likely have the resources to continue research. This data is promising for interested parties.


In December 2015, Eleven Biotherapeutics and Albumedix entered into a technology agreement in which Albumedix would acquire Eleven's proprietary Supermin® albumin variant assets. Albumedix is a wholly-owned subsidiary of Novozymes (CPH: NZYM-B), a multi-billion dollar biotechnology company. All of their financial results are consolidated into Novozymes, meaning they have access to a large amount of capital. From this agreement, it can be determined that Eleven Biotherapeutics has assets that attract attention from even the largest companies. With the company having just paid off an outstanding loan, one must wonder what is occurring behind closed doors.

Institutional Investors

When Abbie Celniker stated that any strategic alternative the company pursued would have "a goal to maximize shareholder value," she has plenty of reason. Many of those that serve on the Board of Directors for Eleven Biotherapeutics are partners in some of the major institutional investors that have holdings in the company. Therefore, the Board will obviously want to look out for their financial interests, and will, like Celniker said, try to maximize shareholder value.

Among those that serve on the Board of Directors:

David Berry, General Partner in Flagship Ventures, which owns nearly 17% of the outstanding common stock. Berry is also the co-founder of Eleven Biotherapeutics.

Cary Pfeffer, Partner at Third Rock Ventures. Pfeffer beneficially owns nearly 25% of the outstanding common stock, including all of that held by Third Rock Ventures.

Daniel Lynch, Chairman of the Board, Venture Partner at Third Rock Ventures.


Eleven Biotherapeutics has a lot going for it. After having attracted attention of ophthalmologists and biotechnology companies at ARVO, and with a Board of Directors with years of experience in dealing with these larger companies, a buyout offer should be expected. Once the company's investigational new drug application for EBI-031 (whose submission will occur this quarter) has been authorized by the FDA, the likelihood of an offer should be accelerated. With dwindling cash and cash equivalents of $13.4 million and operating expenses from the first quarter at about $6.8 million, Eleven Biotherapeutics expects to be able to fund operations into the fourth quarter and, therefore, has a lot riding on the FDA authorization. If the company is unable to receive authorization, it may have a more difficult time of receiving a buyout offer or partnership.

Disclosure: I am/we are long EBIO.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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