How CymaBay Survived a Safety Scare

In November 2019, Sujal Shah was the CEO of a public company with two promising late-stage clinical trials underway. The company was worth more than $900 million. 

A couple months later, he found himself cornered in a parking lot by an activist investor—one of a handful pressuring him to shut down and liquidate his company CymaBay Therapeutics.

“I can smile about it now, but it was easily one of the most difficult times of my professional life,” says Shah, CEO of CymaBay (now a wholly-owned subsidiary of Gilead Sciences).

At the time, CymaBay was running the key clinical trials to determine the safety and efficacy of its PPAR-delta agonist, seladelpar, for two liver conditions: primary biliary cirrhosis (PBC) and metabolic dysfunction-associated steatohepatitis (MASH). When the clinicians scoring the end of treatment MASH trial results reported worrisome pathologic findings, Shah knew it could mean the end of seladelpar and CymaBay.

“We had a moral decision to make at that point in time—wait for more data to be analyzed or immediately halt the trial. We decided to immediately stop the study…after all we had no way simple way to determine whether or not the pathology findings were definitively due to seladelpar or not.”

The consequences were swift and severe. CymaBay had to lay off two-thrids of its employees. The stock fell by 76 percent in a day. Most experts told Shah to abandon seladelpar and move on—an investigation would be difficult and take far too long.

“I couldn’t sleep, and would lay awake at night thinking: none of this made any sense? I had to at least try to figure out what happened.”

Shah and his team at CymaBay stuck to their convictions and launched an investigation into the results—an investigation that four months later would totally exonerate seladelpar from having caused any of the atypical pathology observed.

FDA clinical holds were lifted. The trials started back up. CymaBay’s shares regained their value and more. In March 2024, Gilead acquired CymaBay and seladelpar for $4.3 billion in total equity value. Most importantly, there is a promising new treatment for PBC on the horizon.

“Patient stories were the biggest motivator for me during these difficult times, I learned that many of them had been doing well and feeling better than ever before on seladelpar—it was all the fuel I needed,” Shah says.

Trained as a biomedical engineer at Northwestern University, Shah originally thought he would become a physician, but instead pursued research. After earning his master’s degree in biomedical engineering, Shah eventually went to business school where he was drawn to healthcare investment banking.

“What attracted me was the ability to learn about the entire biotech industry, while also gaining a very concrete financial toolkit.” After rising through the ranks at Credit Suisse and then Citigroup, Shah began his search for an operating role in the industry in 2012. It was during this time that he first met the management team at Metabolex (renamed CymaBay after going public). A year later, he would join full-time as the company’s chief financial officer. 

In our interview, Shah discusses the creative financial mechanism by which he took CymaBay public, lessons learned from the challenging development of seladelpar and the rationale for his management decisions along the way. He shares advice with those in biotech, stressing the importance of letting data drive decision making. Shah admits that at a certain point you just need to have faith: “Ultimately, you must believe. Believe in yourself and in others.”

Read more of our conversation below.

What initially got you interested in science or medicine?

I have always had a propensity for math and science. The intersection of quantitative skills and human biology always seemed remarkable. However, my original goal was to go to medical school and become a physician.

When that path became challenging, I really didn’t know what to do next, so I applied to graduate school [master’s program] in biomedical engineering. I found a laboratory at Northwestern using biodegradable polymers as scaffolds for tissue regeneration. I really enjoyed the research, and at the end of the master’s program could have considered staying to complete a PhD. Yet at the time I made the decision to get a job and go into industry. I didn’t see myself working in a lab for the rest of my career and wanted some real-world experience.  

What was your first experience in industry like? What led you to business school and then investment banking?

In the several years after college, I didn’t have a lot of direction. I took a job at a startup company based in Pittsburgh, called Tissue Informatics. The company was a little bit too far ahead of its time. The mission was not dissimilar from what organizations like PathAI are now attempting with digitized slides and developing algorithms for diagnosis.

The company [Tissue Informatics] was growing, but when the tech bubble burst in 2000, financing dried up. Around this time, I applied to business school with the goal of changing the type of role I could get within biotech. During business school [at Carnegie Mellon] I interned at Roche with an interest in business development and had a full-time offer to work for them after graduation. I also gained exposure to healthcare investment banking and ultimately ended up taking a role with Credit Suisse First Boston when I finished my MBA.

What was your experience like in life sciences investment banking? What skills did you learn that helped you later?

As an investment banker, you gain exposure to many different areas of healthcare and within biotech, many different therapeutic areas. What attracted me to the field was the ability to learn about the industry, while also gaining a very concrete financial toolkit and exposure to capital markets. The transactional experiences in banking later proved to be vital during my 12 years at CymaBay.

The hours [in banking] were intense, but it really does drill into you discipline and a particular skillset: if you asked me to build a three-statement financial model or merger model I could probably still do it, even now! The 100-plus hour work weeks also toughen you up, which came in handy during later parts of my career at CymaBay.

I also learned that the heart of our industry is letting the science and data drive decision making. The best management teams are very honest internally and externally about what data is saying. There is no room for rose colored glasses—you have to be transparent, honest and clear-minded.

After your investment banking career, what led you to start working with Metabolex—the company that later became CymaBay?

After leaving investment banking, I was working as a consultant with several companies and a biotech venture capital firm. I was using this time to look for an opportunity to become Chief Financial Officer of a biotech company.

Eventually I met the team at Metabolex. The team needed financing (about $30 million) to keep the venture going and run another clinical study for an asset being developed for chronic gout. To be honest, raising this amount seemed like an insurmountable task given existing investors were reluctant to put any additional capital in the company without a new lead investor. In fact, I did not join the company initially because it was in such a tough financial position. Over the course of the following year, I helped them raise the money though as a consultant. By the time we pulled off this financing, I was so emotionally invested that I decided to join full time as CFO in 2013.

[What was the financing that you were able to pull off as a consultant and then CFO?]

After a year of trying and failing to find new investors, Metabolex had about three months’ worth of cash left by mid 2013. The board had pretty much resigned itself to bankruptcy. I remember sitting in my car and coming up with an idea. When I was working at Citi as an investment banker, there was a research analyst who left to join a company called Coronado Biosciences. At Coronado, they were able to raise about $20 million from retail investors—basically high net worth individuals where the average investment would typically be between $50,000 to $100,000 per person.

To pull this off, they used a group in New York called National Securities, which has a network of independent brokers. I decided to go to NYC with our CEO at the time to meet with some of these broker firms on behalf of Metabolex to try to raise $30M in funding. After hearing our story, National Securities felt they could raise us $15M. But first, we had to raise the other half from “smart money” biotech institutional investors. As part of this recapitalization, I also had to get J&J’s venture capital arm, JJDC, to forgive $16 million in a convertible note Metabolex owed them in exchange for $3 million of equity credit in the surviving company if we were somehow able to pull off the $30 million financing. JJDC agreed and we were subsequently able to raise $15M from existing investors and venture debt.

Once this happened, we told National Securities “Go!”, and they raised about $17 million within three weeks. The deal turned out to be a about $32M financing with a $52M post-money valuation—so the existing investors were heavily diluted. However the company survived, and we were eventually able to go public. The way in which we went public was quite unconventional—a self-registration form 10—but that is a story for another time.

What was the company’s early focus and what series of events led to the focus on primary biliary cirrhosis?

Before I joined the company, Metabolex had licensed the rights to a second-generation insulin sensitizer to J&J (Janssen). As part of that out-licensing, Janssen offered upfront cash, future milestones and royalties and a clinical asset in return.

Seladelpar, which is the drug that became the future of CymaBay, came from this deal with J&J.

Seladelpar is a selective and potent PPAR delta agonist. Well-known drugs like fenofibrates target the PPAR alpha isoform, which has an established role in LDL and triglyceride biology. Metabolex was originally interested in understanding if PPAR delta agonists could also be used for mixed dyslipidemia—liver disease was not even in the conversation at this point [early 2000s].

In addition to lowering total cholesterol, LDL-cholesterol and triglycerides in patients with mixed dyslipidemia, seladelpar reduced alkaline phosphatase [ALP]. Although these patients did not have ALP above the upper limits of normal, elevated ALP produced in the liver is associated with impaired bile flow [cholestasis] in patients with primary biliary cholangitis [PBC].

Our CMO at that time recognized that ALP was being used as a surrogate endpoint for potential accelerated approval in PBC and we moved forward with a phase 2 study in this indication. The anti-cholestatic and anti-inflammatory elements of seladelpar’s mechanism of action gave us hints that the drug could perhaps be useful in treating liver diseases like primary biliary cholangitis, where ALP was part of an FDA-approved surrogate endpoint.

We decided to shift our development of seladelpar from dyslipidemia to PBC. In the PBC phase 2 trials we saw striking results: clear ALP and bilirubin reductions as well as reductions in pruritus [itching], a menacing clinical symptom of PBC. This data compelled us to pursue liver disease, where there were clearer regulatory paths. Around this time [2017] I was also asked by the board to move from the CFO to the CEO role at CymaBay.

Walk us through what happened when CymaBay got a clinical hold for seladelpar in its MASH trial.

Between 2016-2017 we started generating some interesting Phase 2 data in PBC. We began enrolling patients in a Phase 3 trial of seladelpar for PBC in December 2018. At this point, we were a $500M market cap public company.

Based on our knowledge of seladelpar’s mechanism, we also decided to run a phase 2b study of seladelpar in MASH. In this study we examined measures of liver fat as a primary endpoint, but also took liver biopsies to assess NAFLD activity score [NAS] and fibrosis. Fundamentally PPAR delta drives fatty acid oxidation, in addition to its effects on reducing bile acid synthesis, inflammation and fibrosis.

We believed that treatment would lower liver fat; so, we powered the trial to detect decreases in liver fat. At the 12-week readout, it appeared that the drug did not lower liver fat significantly compared to placebo. This was a surprise to us, and the stock took a 30% hit.  However, our phase 3 trials in PBC were still progressing according to schedule, and we thought that we may see an impact on NAS and fibrosis at the 52-week MASH trial readout.

In November 2019, our two pathologists scoring the MASH 52-week biopsies gave us an alarming call. They told us that they were seeing a significant number of patients with interface hepatitis or periportal inflammation—features that were not previously reported in MASH. It appeared that these pathologic features, which were present in almost 30% of the end of treatment biopsies scored, could have be associated with drug treatment.

Over the course of a weekend, we consulted with a number of hepatologists and MASH experts—nobody knew what to make of these findings. Was it possible that the drug was causing injury? Despite the biopsy findings, we were seeing reductions in liver injury markers and bilirubin levels in trial participants. As our hepatologists pointed out, the patients had no laboratory or clinical features of liver damage. The pathology findings did not match the overall clinical picture for these patients but we had no way to prove or disprove whether or not these findings were being caused by seladelpar.

We had a moral decision to make at that point in time—wait for more data to be analyzed or immediately halt the trial. We decided to immediately stop the study and call the FDA. On one hand this was one of the most difficult decisions to make as I knew it would likely mean the end of seladelpar and also the end of CymaBay. On the other hand it was an easy decision because I was never going to put patient safety at risk.

What happened?

Seladelpar was put on a formal clinical hold. Prior to this point, CymaBay was a $900M market cap company. The Street reacted to the news: our stock tanked to $1 a share, or a $100 million in market cap even though we had $2 a share or $200 million of cash on the balance sheet. We had to lay off two thirds of the company right before Christmas of 2019.

It was one of the worst times in my life. I felt that I had poured my soul into the company: it was all gone in a flash. I couldn’t sleep, and would lay awake at night thinking: “none of this made any sense?” I had to at least try to figure out what happened.

Given CymaBay had $200M of cash and only a $100M market cap, an activist investor bought 10% of the company—he wanted to pressure us to liquidate and thus make a quick return. He wrote a public letter calling for dissolution of the company and accusing me and the Board of not acting in the best interests of investors. I knew that we had to run an investigation to figure out what happened while we also considered strategic alternatives including liquidation as required by our fiduciary duties. Many experts told us it would take years to complete a proper investigation and that it would be impossible to ever learn anything definitive.

Despite the challenge of having to prove a negative, we launched an investigation into understanding the findings and whether or not seladelpar caused them. We assembled what I would call the “dream team” of hepatologists and hepatopathologists with significant experience in drug-induced liver injury [DILI]. We were conducting this investigation in the backdrop of a COVID pandemic and a group of activist investors trying to shut us down.

At this point, there were half a dozen investors calling me daily with accusations and threats. One [activist] even approached me in a parking lot when I was on my way to a meeting. I can smile about it now, but it was easily the most difficult time of my professional life.

A month before our annual shareholder meeting where the lead activist was positioning to get his slate of Board nominees to take over, we finished the investigation.

Here is what we found: every single one of the patients with what the study pathologists deemed was “atypical” pathology in NASH [including interface hepatitis] at the end of study biopsy readings had the same pathology in their baseline biopsies before they were dosed with seladelpar. The biopsy findings were totally independent of treatment. Subsequent retrospective analyses from other trials and patients have shown that between 25-30% of complex MASH patients can display this type of pathology—periportal inflammation or interface hepatitis—at baseline.

We shared these findings publicly and the stock tripled. A couple months later the FDA released all clinical holds. We had to enroll a brand new PBC phase 3 trial and raise another $150M. However, it was worth it: we had dozens of PBC patients come to us when we were on clinical hold saying: “I have never felt better than when I was on seladelpar, please don’t give up.” This was the biggest motivator for me during these difficult times—it was all the fuel I needed.

What are some important lessons learned during the difficult times at CymaBay?

There are many lessons I learned in my time at CymaBay: let the data drive your decision making, hold patients and unmet need as your guiding light, and do not be afraid to disagree with the “experts” if you have conviction.

When the clinical hold on seladelpar was released, the activist investor who was pressuring me to liquidate CymaBay gave me a call.

He effectively said: “Sujal I have got to hand it to you. You stuck to your convictions and you and your team are the right people to lead the company.” During the investigation period, I answered every call from every activist investor. The minute you stop answering, you add fuel to the fire. In my role as CEO it was my duty to take these calls, treat everyone with respect (no matter how challenging) and stick to our internal convictions and plan

Dylan Neel is a final-year MD/PhD candidate at Harvard Medical School. He earned his PhD in Immunology, where he studied innate immune mechanisms in neurodegenerative disease. During graduate school he worked part-time at Vida Ventures and is the Editor of the Biomarker Substack. He graduated summa cum laude from Harvard College, with a degree in neuroscience.