United States securities and exchange commission logo
June 9, 2023
Sammy Farah, M.B.A., Ph.D.
President and Chief Executive Officer
Turnstone Biologics Corp.
9310 Athena Circle, Suite 300
La Jolla, California 92037
Re: Turnstone Biologics
Corp.
Draft Registration
Statement on Form S-1
Submitted May 15,
2023
CIK No. 0001764974
Dear Sammy Farah:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1, submitted May 15, 2023
Cover Page
1. We note that you have
applied to list your common stock on the Nasdaq Global Market.
Please revise the cover
page of the prospectus as follows, and make conforming revisions
where appropriate:
State, if true,
that no assurance can be given that your listing application will be
approved.
Disclose whether
your offering is contingent upon final approval of your NASDAQ
listing, and ensure
this disclosure is consistent with your underwriting agreement. If
your offering is
not contingent on listing approval, include a risk factor describing the
consequences of not
being listed.
Sammy Farah, M.B.A., Ph.D.
Turnstone Biologics Corp.
June 9, 2023
Page 2
Prospectus Summary , page 1
2. We note that your auditors have issued a going concern opinion
regarding
your operations. Please revise your disclosure throughout the
prospectus as follows:
Expand and balance your Summary disclosure by including discussion
regarding
your recurring net operating losses with the exception of the year
ended December
31, 2021, the expectation of continuing operating losses and
negative cash flows
for the foreseeable future, the termination in 2021 and 2022 of
the AbbVie and
Takeda Agreements that appear to have previously been your sole
sources of
collaboration revenue, the need to raise additional capital to
finance your
future operations, and the auditor's going concern opinion.
Revise your summary risk factor on page 7 to disclose that if you
cannot continue as
a viable entity, your stockholders may lose some or all of their
investment in
your company.
3. Please revise your prospectus summary to define or explain briefly the
following scientific
terms:
potency and potent T cells
TIL quality, function, and persistence
clinically meaningful
tumor heterogeneity
PD-(L)1 treatments
Also, we note that you use terms such as "deep and durable response,"
"progression-free
survival," "objective response rate" and "complete response rate"
throughout the
prospectus when describing third party clinical trial results. Explain
the meaning of these
terms in relation to observed clinical trial endpoints and clarify, if
true, that they do not
indicate that the patient was cured of the condition.
Our Solution: Selected TILs, page 2
4. You state on page 2 and elsewhere throughout the prospectus that the
company is
developing next generation TIL therapies designed to drive "curative
outcomes" across
multiple solid tumors. If true, please revise to clarify that no TIL
therapies have received
FDA approval to date and that at present, no therapies in clinical
development for the
solid tumor indications that you are addressing are curative.
5. You state on page 2, 113 and 120 that your selective expansion process
"results in a
substantially higher absolute number and proportion of tumor-reactive T
cells in the final
product in comparison to the relatively infrequent tumor-reactive T
cells that are routinely
found in bulk TIL." Please revise to provide the basis for this
statement, and quantify the
FirstName LastNameSammy Farah, M.B.A., Ph.D.
number and proportion of tumor-reactive T cells in Selected TILs versus
bulk TIL to the
Comapany NameTurnstone
extent appropriate so Biologics Corp.
that investors can compare against your target
rate of >70%
June 9,disclosed
2023 Pagein2the figure on page 3.
FirstName LastName
Sammy Farah, M.B.A., Ph.D.
FirstName LastNameSammy
Turnstone Biologics Corp. Farah, M.B.A., Ph.D.
Comapany
June 9, 2023NameTurnstone Biologics Corp.
June 9,
Page 3 2023 Page 3
FirstName LastName
6. In the figure depicting advantages of Selected TILs over bulk TILs
appearing on pages 3,
113, and 121, please remove or revise the reference to tumor-reactive
T cells contributing
to "efficacy." In the appropriate place(s), please provide a reference
for your disclosure
that the reported median of on-target tumor-reactive T cells in bulk
TIL is <3%.
Additionally, on pages 2 and 113, please revise your related narrative
discussion to
provide context for the statement that Selected TILs hold potential
for "potent" targeted
tumor killing as you have on page 121.
Supporting Clinical Evidence , page 3
7. You state on pages 3 and 122 that clinical studies in academic centers
utilizing selection
strategies to select for tumor-reactive T cells have "demonstrated
positive outcomes in
challenging solid tumors, where bulk TILs have had limited to no
success." Please revise
your discussion of the results of these and any other clinical trials
or preclinical studies,
whether conducted by you or third parties, to remove any conclusory
statements regarding
the trial results or their meaning and instead focus on the specific
factual details of the
studies, including quantitative information regarding the range of
results observed
and describe the results using objective data and/or terminology based
on the trial
endpoint(s).
Our Pipeline, page 4
8. We note that an investigator-sponsored clinical trial is ongoing with
H. Lee Moffitt
Cancer Center and Research Institute, Inc., investigating TIDAL-01 as
a potential therapy
in both cutaneous and non-cutaneous melanoma. Please expand your
disclosure in the
appropriate place(s) to clarify briefly the nature of the
investigator-sponsored study, how
one differs from a trial sponsored by your company, and your
role/responsibility, if any, in
the trial. Please also tell us your consideration of providing risk
factor disclosure
concerning the clinical trial risks associated with
investigator-sponsored clinical trials.
Our History and Team, page 5
9. Please limit your Summary disclosure of specific investors to those
identified in the
Principal Shareholder table on page 194. Additionally, indicate that
prospective investors
should not rely on the named investors investment decision, that
these investors may
have different investment strategies and risk tolerances. If true,
disclose that the preferred
stock offering(s) in which such investors purchased shares were
conducted at a significant
discount to the IPO price.
Our Strategy , page 5
10. We note your use of the term high unmet medical need here and
elsewhere throughout
the prospectus, as well as your statement that you are pursuing a
clinical development
strategy designed to "support an efficient path to registration." Such
statements might
imply that your products are eligible for fast track designation or
priority review granted
Sammy Farah, M.B.A., Ph.D.
FirstName LastNameSammy
Turnstone Biologics Corp. Farah, M.B.A., Ph.D.
Comapany
June 9, 2023NameTurnstone Biologics Corp.
June 9,
Page 4 2023 Page 4
FirstName LastName
by the FDA for products that treat certain serious unmet medical
needs. If material, please
expand this section to provide context for these references and
briefly explain your
development strategy for your TIL product candidates in the U.S. and
abroad. In this
regard, we note that you state on page 55 that you intend to seek
approval for your
candidates in both the U.S. and in "selected foreign jurisdictions,"
which should be
identified to the extent known or reasonably anticipated.
Additionally, please revise pages 6 and 117 to explain how the design
of your analytical
characterization program will "minimize regulatory hurdles" or remove
this reference.
11. We note that you have initiated two Phase 1 clinical trials for your
lead product candidate,
TIDAL-01, for the treatment of various cancers. On page 5, you state
your belief that
positive results from one or both of these clinical trials has the
potential to support
advancement of TIDAL-01 into registrational trials across multiple
solid tumor types.
Please define the term "registrational trials" and explain the basis
for your belief. Your
discussion should clarify the factors that will determine whether your
TIDAL-01
trials become registrational and who will make such determination.
The Offering
Use of Proceeds, page 10
12. Please revise your Use Of Proceeds disclosure here and on page 86 to
provide your best
reasonable estimate regarding how far into development and/or the
regulatory review
process you expect each such program to reach using the allocated
offering proceeds. If
any material amounts of other funds are necessary to accomplish any
specified purposes
for proceeds from this offering, state the amounts and sources of
other funds needed for
each specified purpose. Refer to Instruction 3 to Item 504 of
Regulation S-K.
Risk Factors
We may attempt to secure approval from the FDA or comparable foreign
authorities..., page 38
13. We note your disclosure that you may seek accelerated approval for one
or more of your
product candidates.
Please revise your disclosure to clarify that because your
candidates are in early
development, there can be no assurance that the FDA would approve
any form of
application for expedited review for any of your product
candidates.
Affirmatively state that the FDA s accelerated approval pathways
do not guarantee an
accelerated review by the FDA. Further, explain that even if a
product candidate
could be granted a designation or qualify for expedited
development, it does not
increase the likelihood that the product candidate will receive
approval.
Our principal stockholders and management own a significant percentage of our
stock..., page 77
14. We note your disclosure regarding the significant concentration of
ownership of the
company. Please tell us whether you will be considered a "controlled
company" within
Sammy Farah, M.B.A., Ph.D.
FirstName LastNameSammy
Turnstone Biologics Corp. Farah, M.B.A., Ph.D.
Comapany
June 9, 2023NameTurnstone Biologics Corp.
June 9,
Page 5 2023 Page 5
FirstName LastName
the meaning of NASDAQ listing standards post-offering. If so, provide
appropriate
disclosure of your controlled company status on the prospectus cover
page and revise this
section and the Prospectus Summary, where appropriate, to indicate
that you will be a
controlled company" and the implications of such status, including
whether you plan to
utilize any of the exemptions available to you. Also revise the
Prospectus Summary to
address the risks of being a shareholder in a controlled company, and
include information
regarding the controlling shareholder(s) and their ability to impact
your company and its
stated business strategies.
Our amended and restated certificate of incorporation will provide that the
Court of Chancery of
the State of Delaware..., page 80
15. Please revise the last paragraph of this risk factor to disclose that
the exclusive forum
provisions that will be contained in your amended and restated
certificate of incorporation
may result in increased costs to shareholders to bring a claim.
Additionally, make
conforming revisions to the Choice of Forum section beginning on page
201.
Components of Our Results of Operations
Revenue
Collaboration Revenue, page 98
16. Please revise to clarify that you do not anticipate recording any
additional revenue under
the AbbVie Biotechnology Ltd. agreement in the future due to the
contract termination
and provide similar disclosure relating to the termination of the
Takeda agreement for
which the second termination notice is effective on July 6, 2023.
Clarify on page 101 the
amount of the revenue recorded in 2022 and 2021 that related to the
terminated
agreements.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Components of Our Results of Operations
Collaboration Revenue, page 98
17. Please revise your disclosure in this section to briefly explain why
the AbbVie Agreement
terminated in 2021 and the Takeda Agreement will be terminated in its
entirety as of July
2023. Additionally, please file the Takeda Agreement as an exhibit to
your registration
statement or tell us why you believe you are not required to do so.
Refer to Item
601(b)(10) of Regulation S-K.
Results of Operations
Research and Development Expenses, page 101
18. Please disclose the costs incurred during each period presented for
each of your key
research and development projects/indications. In particular, clarify
how much of the
historical research and development expense related to the RIVAL-01
program under the
Takeda agreement which was terminated. If you do not track your
research and
Sammy Farah, M.B.A., Ph.D.
Turnstone Biologics Corp.
June 9, 2023
Page 6
development costs by project, please disclose this fact and explain
why you are not able to
provide this level of disclosure.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Critical Accounting Policies and Estimates
Determination of the Fair Value of Common Stock, page 109
19. Once you have an estimated offering price or range, please explain to
us how you
determined the fair value of the awards underlying your incentive
units and the reasons for
any differences between the recent valuations of your units leading up
to the IPO and the
estimated offering price. This information will help facilitate our
review of your
accounting for equity issuances including stock compensation. Please
discuss with the
staff how to submit your response.
Business
Our Strategy, page 116
20. We note your disclosure that you are "leveraging deep and strategic
relationships with a
number of academic collaborators, including Moffitt" to support
development of your
Selected TIL therapies.
Please revise to quantify the number of academic collaborators
with whom you have
material relationships.
We note your disclosure on page 134 regarding your "ongoing
collaboration with Dr.
Simon Turcotte at the Centre Hospitalier de l'Universite de
Montreal" and disclosure
on page 137 stating that you are collaborating with "the NCI," an
acronym which
should be defined at first use on page 119. Please advise if there
is a collaboration
agreement in place with either institution or any others. If so,
please describe the
material terms of the collaboration agreements and file them as
exhibits with your
next amendment or tell us why you believe you are not required to
do so. Refer to
Item 601(b)(10) of Regulation S-K.
Overview of Current Cancer Immunotherapies and Limitations, page 118
21. Please revise the figure on page 119 to remove the statements that TIL
therapy is the only
cell therapy that "has shown clinical efficacy in multiple solid
tumors" and has a
"manageable safety profile."
Virus Combinations, page 124
22. You state that the potential of viral immunotherapy has been
"demonstrated through
FirstName LastNameSammy Farah, M.B.A., Ph.D.
subsequent clinical data achieved by the next generation of viral
immunotherapies in
Comapany NameTurnstone
development." PleaseBiologics
revise toCorp.
place this statement within the proper
context by
June 9,objectively
2023 Page summarizing
6 any material results from such trials, or
remove.
FirstName LastName
Sammy Farah, M.B.A., Ph.D.
FirstName LastNameSammy
Turnstone Biologics Corp. Farah, M.B.A., Ph.D.
Comapany
June 9, 2023NameTurnstone Biologics Corp.
June 9,
Page 7 2023 Page 7
FirstName LastName
TIDAL-01, page 125
23. Please revise your descriptions of the preclinical and nonclincal
trials conducted in
support of your programs to disclose the number of tests conducted,
the number of
participants or samples in each test, and the range of results
observed. Disclose whether
selected sample patient results presented are representative of a
broader sampled group, as
applicable.
Strategic Alliance and Collaboration with Moffitt Cancer Center, page 129
24. You state that the company has entered into a first of its kind
strategic alliance with
Moffitt to leverage their expertise for "rapid advancement of TIDAL-01
into the clinic"
and for access to "accelerated clinical site activation and patient
recruitment." Please
revise these and any similar disclosures throughout the prospectus to
remove any
implication that you will be successful in developing your product
candidates, obtaining
necessary regulatory approvals, or commercializing your product
candidates in a rapid or
accelerated manner, as such statements are speculative. Additionally,
please explain how
your agreement with Moffitt is the "first of its kind."
Clinical Evidence Supporting Viral Immunotherapy Combination, page 135
25. You state that the graph on page 136 presents comparative
translational data for
"multiple" colorectal cancer patients from a prior clinical trial.
Please revise to state when
such clinical trial was conducted and by whom, quantify the number of
such patients
enrolled in the trial, and disclose whether any serious adverse events
were observed.
Myst Merger Agreement, page 139
26. Please revise this section and the Dilution section beginning on page
91 to disclose that if
the company elects to pay any milestone consideration owed to the Myst
Holders in shares
of common stock rather than in cash, there will be further dilution to
stockholders.
Intellectual Property
Additional Miscellaneous Virus IP, page 142
27. In relation to the Company's material patents, please revise your
intellectual property
disclosure in this section to clearly describe on a patent family
basis the type of patent
protection granted for each product or technology, whether such patent
is owned or
licensed, and the jurisdiction, including any foreign jurisdiction, of
each material pending
or issued patent.
Certain Relationships and Related Party Transactions
Public Offering Participation Rights , page 192
28. Please revise this section to quantify the percentage of the shares of
common stock in this
offering that PFM will have the right to purchase, and disclose
whether the shares will be
Sammy Farah, M.B.A., Ph.D.
FirstName LastNameSammy
Turnstone Biologics Corp. Farah, M.B.A., Ph.D.
Comapany
June 9, 2023NameTurnstone Biologics Corp.
June 9,
Page 8 2023 Page 8
FirstName LastName
offered as part of the public offering or in a separate private
placement.
Principal Stockholders, page 194
29. Please revise the table on page 194 to identify the natural person(s)
with voting and/or
dispositive control over the shares held by F-Prime Capital and FACIT
Inc.
Notes to the Financial Statements
7. Asset Acquisition, page F-28
30. Please clarify in the filing the accounting treatment for the Myst
Merger. Address
whether or not the acquisition is considered a business pursuant to
ASC 805-10-55-4
through 55-9. If you conclude the acquisition was not a business
combination, tell us your
consideration of accounting for the contingent consideration under ASC
815, and if ASC
815 is not applicable, ASC 450. If you believe ASC 815 and ASC 450 are
not applicable,
please tell us your basis for accounting for the liability under ASC
480.
General
31. With reference to the following non-exhaustive list of illustrative
examples,
please remove or revise these and all other statements throughout the
prospectus that state
or imply that your product candidates are safe or effective, as these
determinations are
solely within the authority of the U.S. Food and Drug Administration
and comparable
regulatory bodies:
Clinical trials with standard bulk TILs have "shown clinical
efficacy in limited solid
tumor types while demonstrating a consistent and manageable
safety profile" (pages
1, 112, 119) and "bulk TILs have already shown clinical efficacy"
(pages 3, 114, and
123). In this regard, we note your disclosure on page 42 that
TIL-based therapy is an
emerging field and there are no approved TIL therapies.
Many viruses have inherent oncolytic activity that can be
modulated to "enhance
potency and safety" (pages 4 and 114).
TIL therapy is the only cell therapy that "has shown clinical
efficacy in multiple solid
tumors" and has a "manageable safety profile" (figure on page
119).
The company's goal is to develop TIL therapies that will "provide
greater efficacy" in
a broad range of solid tumor types and the company believes that
the greater the
population of delivered tumor-reactive T cells, the "higher the
tumor killing and
resulting therapeutic benefit" (page 120).
Prospective and translational clinical data in the TIL field
supports the potential of
the company's Selected TIL approach to provide "superior clinical
benefit relative to
bulk TILs" (pages 3 and 113) and the "potential superiority" of
the company's
Selected TIL approach (page 121).
Academic studies utilizing TIL selection strategies have yielded
"promising
outcomes" and "promising responses" (pages 122 and 123), and the
company has
observed "encouraging translational data" and "favorable
tolerability" supporting its
combination of Selected TILs with viral immunotherapies (page
135).
Sammy Farah, M.B.A., Ph.D.
Turnstone Biologics Corp.
June 9, 2023
Page 9
Your Selected TIL process includes "potent anti-tumor activity, as
observed in
preclincial studies" (page 128).
Nonclinical studies demonstrated that your TIDAL-01 process
resulted in "anti-tumor
activity" and "potent tumor-killing activity" (page 129).
TIDAL-01 data are "anticipated to corroborate clinical safety and
efficacy
observations" (page 134).
The company believes its combination strategy "could be
particularly effective" in
indications with highly suppressive TMEs (page 135).
32. Please file the following as exhibits pursuant to Item 601(b)(10) of
Regulation S-K with
your next amendment, or tell us why you believe they need not be filed.
We may have
additional comments once we have had an opportunity to review these
agreements.
Any material supply contracts. In this regard, we note your
disclosure on page 33
that you do not have supply contracts with "many of [your]
suppliers."
Any material license agreements. In this regard, we note your
disclsoure on page 64
that you are a party to existing license agreements pursuant to which
you in-license
key patent and patent applications, know-how, trade secrets and data
rights for your
product candidates.
Second Amended and Restated Investors' Rights Agreement between the
company
and the convertible preferred stockholders.
33. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to do
so on your behalf,
have presented or expect to present to potential investors in reliance on
Section 5(d) of the
Securities Act, whether or not they retain copies of the communications.
You may contact Christine Torney at 202-551-3652 or Mary Mast at
202-551-3613 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Lauren Sprague Hamill at 303-844-1008 or Joshua Gorsky at 202-551-7836
with any
other questions.
Sincerely,
FirstName LastNameSammy Farah, M.B.A., Ph.D.
Division of
Corporation Finance
Comapany NameTurnstone Biologics Corp.
Office of Life
Sciences
June 9, 2023 Page 9
cc: Ryan Sansom
FirstName LastName