VCs sell stakes in Kandy Therapeutics to Bayer

The closing of the deal remains subject to regulatory approval and is expected by September 2020.

Kandy recently completed its phase-IIb clinical trial with the therapy NT-814, which it claims shows positive results in relieving the symptoms of menopause. According to a statement, the phase-III trial is likely to begin in 2021 and responsibility for the study will be assumed by Bayer.

According to the same statement, Bayer will pay an upfront consideration of $425m, followed by potential milestone payments of up to $450m until the launch of Kandy's therapy, followed by potential additional triple-digit million sales milestone payments.

Advent was Kandy's largest shareholder, with a 20% stake in the business. Kaasim Mahmood, general partner at Advent Life Sciences, told Unquote: "I can't disclose the returns, but we think this is an outstanding management team that has delivered a very strong return. The team is now focused on Nerre Therapeutics, where they are working developing its portfolio of three neurokinin-1 antagonists for the treatment of chronic cough."

Geert-Jan Mulder, managing partner and co-founder at Forbion, explained the firm's initial rationale for investing in Kandy: "Almost 25 years ago, I was a resident in obstetrics and gynaecology when I worked in the clinic, and I have kept an interest here, but never imagined being able to do an investment in this space. There has not been a lot of interest or activity in the area of women's health; it has mainly been related to post-menopause conditions such as osteoporosis and oncology. So when we saw the asset for the first time I was instantly interested, and it was a great chance to invest."

Mulder explained that Forbion invested in Neere Therapeutics originally, from which Kandy was spun out in 2017. "We invested in Nerre initially – it had two assets, one in women's health (NT-814) and one in chronic refractory cough. We were the only syndicate who also wanted to invest in the women's health asset and so we closed a financing round with Fountain, OrbiMed and Advent; later on NT-814 was de-merged to form Kandy. We had seen the previous trial results in summer 2017 and it showed that the compound had a very pronounced effect, which needed to be confirmed in a phase-IIb trial in a larger patient population, which was shown towards the end of 2019 – that was the basis for de-risking the compound and engaging with strategic partners as it was ready for phase-III studies."

Mulder told Unquote: "The exit process started more or less after the results and around the JP Morgan Conference in early 2020. There was broad interest in the asset – we made a selection based on terms, but also felt that the fact that Bayer is a leader in women's health meant it made most sense to close the deal with them. It was fortunate that Bayer had already visited the company before the coronavirus travel bans hit."

Previous funding
In September 2017, Advent Life Sciences, Fountain, Forbion and OrbiMed led a funding round for Kandy. Fountain invested via Fountain Healthcare Partners Fund II, while Forbion invested from Forbion Fund III. Advent invested via its first fund, which had also invested in the foundation of Nerre.

In August 2018, new investor Longitude Capital led a £25m series-C funding round for the company, which was also backed by Advent, Fountain, Forbion and OrbiMed. The proceeds from the round were used to finance the company's phase-II clinical trials.

Company
Kandy develops a drug therapy to treat the vasomotor symptoms of the menopause, which include hot flushes and night sweats, using the compound NT-814, which is non-hormonal and orally administered. The company claims that NT-814 could generate sales potential of up to €1bn.

Kandy is based in Stevenage and was founded as a spinout from Nerre in 2017. Nerre was founded in 2012 by Advent Life Sciences, alongside Mike Trower. Mary Kerr, CEO of Kandy and former Advent operating partner, became CEO of Nerre in 2015.

People
Forbion Capital Partners – Geert-Jan Mulder (managing partner, co-founder).
Kandy Therapeutics – Mary Kerr (CEO, co-founder).
Advent Life Sciences – Kaasim Mahmood (general partner).

Advisers
Acquirer – Morgan Stanley (corporate finance); Linklaters (legal).
Company – Goldman Sachs (corporate finance); Goodwin (legal).

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