Two Covid-era biotech IPOs — Spruce and Graphite Bio — see stock head in different directions

Clinical trial data sent one Bay Area biotech's stock tumbling Friday while another drug developer's stock nearly doubled with a partnership in Japan for its lead drug.

Spruce Biosciences Inc. and Graphite Bio Inc. are both South San Francisco biotech companies dealing with genetic diseases that hit the public markets with upsized initial public offerings during the Covid-19 pandemic. But the similarities end there.

The market's reaction to the companies' news is indicative of how life sciences companies can live on the edge of partnerships and clinical trials news.

The high-risk, high-reward nature of the industry will likely be spotlighted more next week as 10,000 to 15,000 company executives, investment bankers and venture capitalists gather in San Francisco for the 41st annual J.P. Morgan Healthcare Conference. It is the first in-person "JPM Week" — highlighted by get-to-know-you meetups and dealmaking sessions — since January 2020 because of Covid-related restrictions.

Spruce (NASDAQ: SPRB) is working toward a pivotal clinical trial in congenital adrenal hyperplasia, or CAH, a potentially life-threatening set of conditions in which a gene mutation results in a deficient production of one of the enzymes needed to make specific hormones. It said late Thursday it entered an exclusive development and commercialization collaboration in Japan with Tokyo's Kaken Pharmaceutical Co. Ltd.

The deal centers on tildacerfont, the oral, small-molecule, once-a-day drug it licensed from Eli Lilly and Co. in 2016. It has focused the drug on CAH, with data from a Phase II pediatric study due in the first half of this year and another midstage study in adult patients expected to be completed in the second half of the year.

Kaken will have the first right of negotiation to expand the scope of the deal to China — where Spruce executives estimate 145,000 CAH patients live — as well as South Korea and other southeast Asian countries.

There are an estimated 20,000 people in the United States with CAH, a condition that hasn't seen much innovation since the development of synthetic steroids more than a half-century ago, Spruce CEO Dr. Javier Szwarcberg said at a conference in November.

Spruce will receive an upfront payment of $15 million from Kaken and be eligible for development and commercialization milestones as well as double-digit royalties on net sales in Japan.

Spruce also is studying the drug in a midstage clinical trial in polycystic ovary syndrome — the most common cause of female infertility — that is expected to report data in the first half of this year.

Spruce's stock climbed Friday by more than 93% — $1.17 per share — to close at $2.42. Its IPO in October 2020 was priced at $15 per share.

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Todd Johnson | San Francisco Business Times

The news wasn't so good for Graphite (NASDAQ: GRPH), which said Thursday it was voluntarily pausing a Phase I/II study of its gene therapy nulabeglogene autogedtemcel, or "nula-cel," for sickle cell patients after a serious reaction by a patient in the clinical trial that it said was likely due to the treatment.

The therapy is aimed at correcting the gene responsible for red blood cells forming a sickle shape, clumping together and painfully clogging blood vessels, increasing the risk of stroke and early death.

"The safety of every patient who participates in our clinical studies and is treated with our therapies is our absolute highest priority," Graphite CEO Dr. Josh Lehrer said in a statement.

As a result of the stoppage of the sickle cell trial, the company said it no longer expects to file a new drug application for another therapy, called GPH-102, for beta thalassemia by mid-2024. Graphite also said it is looking to trim costs to extend its cash runway into 2026.

Graphite stock fell more than 39% Friday, losing $1.21 per share to close at $1.85. It IPO'd in June 2021 at $17 per share.

In the first week of the new year, the NASDAQ Biotech Index inched up 1.4%, a welcome bump after nearly two years of life sciences stocks generally in decline. The index still was down about 3.7% from a year ago.

Besides Spruce and Graphite, other Bay Area life sciences companies saw big shifts in their stocks this week:

• Thirty-two-year-old Geron Corp. (NASDAQ: GERN) of Foster City closed the week down a penny to $2.50 after climbing as high as $3.84 and reporting topline data from a late-stage clinical trial of its drug imetelstat in precancerous myelodysplastic syndromes.

• Jasper Therapeutics Inc. (NASDAQ: JSPR) of Redwood City, which had a one-day Tuesday jump of 467%, closed up 206% from last week's close to $1.48 after reporting positive data from a Phase I/II clinical trial of its monoclonal antibody drug briquilimab as a conditioning agent for treatment of sickle cell disease and beta thalassemia. After going public via a blank-check merger in September 2021, it opened at $14.06.

• Emeryville's Lucira Health Inc. (NASDAQ: LHDX) was up 180% on the week to 39.55 cents per share on the company's announcement that it submitted an application asking the Food and Drug Administration for over-the-counter emergency use authorization of its molecular test for both Covid and the flu. The company went public in February 2021 at $17 per share.