4D Pharma was full of promise, with a terrific idea: to harness the live bacteria we all have in our intestines to help tackle a range of diseases in other parts of the body. Soon after the group floated on Aim in 2014, its share price tripled.
This is just the sort of investment that ethical investors look for, especially since 4D Pharma’s proposed remedies seemed safe because they came from bacteria derived from humans. Its five clinical programmes entered either phase I or phase II stages (relating to solid tumours, cancers and asthma) and a sixth called Blautix (for irritable bowel syndrome) went on to complete a successful stage II trial. It collaborated with Merck & Co (US:MRK) on research to develop vaccines, and with Parkinson’s UK and the Michael J Fox Foundation on pre-clinical programmes that targeted central nervous system disorders. It had others tackling cancer and autoimmune diseases. Neil Woodford invested. He was, he said, “fascinated by the opportunity for innovation in this sector to not only benefit society but to deliver great returns to shareholders”.
The directors, and especially the two founders, Duncan Peyton and Alex Stevenson, invested their own money, but companies at this early stage rip through cash, and financing is a constant juggling act. In early 2021, 4D Pharma received cash of about $15mn from a US special purpose acquisition company (Spac) that gave it a secondary listing on Nasdaq. Merck also took part in a share placement for $25mn (£21mn). In July 2021, a senior secured credit facility was agreed with Oxford Finance LLC, who said that they knew life sciences and healthcare “intimately well” and that since 2002 it had funded a range of companies with over $9bn, providing “credit facilities ranging from $5mn to $200mn”. It initially lent 4D Pharma a relatively modest $12.5mn, which Peyton said would extend “our cash runway into Q4 2022”. Until September 2023, only interest had to be paid, and then if certain milestones were achieved, another $17.5mn could be borrowed and the interest-only period would be extended to September 2024.