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Prelude approved to receive state grant funds early

Katie Tabeling
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Prelude Interim Chief Finance Officer Bryant Lim came before the Council on Development Finance to discuss why the company needed the $2.6 million earlier than scheduled. | DBT PHOTO BY KATIE TABELING

WILMINGTON — With many therapies now in the clinical study phase, Prelude Therapeutics has received state approval to receive $2.6 million from previous grant awards early to aid the companies’ expansion efforts.

The early release of state dollars comes at a time when the company continues to grow in its new headquarters and as its stock continues to hover just under $5 per share.

Prelude also received approval from the Council on Development Finance (CDF) last week to extend its contract on millions in state-taxpayer backed grants awarded in late 2021. Those grants, which came from the Strategic Fund, were tied to job creation and its new headquarters and lab space at the Chestnut Run Innovation and Science Park.

It was an unusual request, as the CDF typically signs off on grants and has rarely heard extension requests. The job performance grants are paid out once the company has demonstrated employees have been hired, rather than before. However, the board granted the early disbursement on a 90-day basis with mandated employment reports.

In October 2021, Prelude was awarded $3.1 million in a job performance grant to hire 121 new employees over the course of three years.

“Certainly we like having Prelude here, and there’s no question about that….early funding is a challenge because we don’t do that, but we can speed up the funding the employees hired instead of reviewing on a yearly basis,” CDF Chairman Fred Sears II said on April 22. “This is not something we want to create a precedent on.”

Led by Kris Vaddi, Prelude Therapeutics has burst on the global scene with its work on small molecule inhibitors, a developing therapy that is more targeted in approach with fewer side effects than traditional cancer therapies like chemotherapy or radiation.

Right now, the company has six therapies in the clinical study phase, with three in Phase I, or limited human testing for safety. Prelude is also studying treatments in acute myeloid lymphomas, a blood and bone marrow cancer as well as lung cancer and esophageal cancer. But with human clinical trials, the costs rise significantly.

Over the past seven years, Prelude has been awarded a total of $7.7 million in Strategic Fund grants. But Prelude Interim Chief Finance Officer Bryant Lim said that the company is looking to accelerate its research, and the early grant funds would help meet those targets.

“We continue to have an incredibly prolific research organization generating new drugs and biologics entering the clinic roughly every 18 months,” Lim told the board. “This investment will enable us to continue to hire highly trained personnel for operation and maintenance, allowing us to come closer to achieving our employment goals.”

A letter to the Delaware Division of Small Business, obtained by the Delaware Business Times through public records requests, notes that as of last month, Prelude has received $5.1 million from state taxpayer-backed grants with $2.6 million left. Laurent Chardonnet, the company’s then-chief financial officer, also wrote to the state that construction delays and rising costs due to inflation and supply shortages drove up the final cost of its headquarters at CRISP.

Construction costs increased more than 35% from the time of the original budget and lease signing in 2020 to December 2023, Chardonnet wrote. Those added costs are shared between Prelude and the MRA Group, which in turn, raised lease costs over the next several years to recoup the investment.

The early disbursement of Strategic Funds signals Delaware leaders’ belief in Prelude, which reported $232.9 million in cash and equivalents at the end of 2023 and an estimated cash flow runway into late 2025. However, Prelude’s stock has still shown signs that investors’ confidence has wavered, as its stock has been slowly retreating over the years.

In the last six months, Prelude stock hit a record trading price of $5.83 in mid-April. Analysts from HC Wainwright downgraded the company stock from buy to neutral, with a target price range of $3.03 to $10.50, earlier this spring. However, analysts from Barclays still maintained an equal weight recommendation for Prelude, or that the company would perform in line with an index.

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