15 Biotech Catalysts I Like Happening In The Next Nine Months
Disclaimer: These are my opinions. Do your own research. Not financial advice.
The following writing is presented in short hand note format without explaining disease states, currently approved agents, future competition, or other background information on the companies so research may be required to get up to speed on each event. My goal is to get this information out there for discussion without the burden of having to write another book or 15 long articles for which I would have to charge money.
(By the way - I do have a book available on Amazon - now approaching its one year anniversary but still a good read in my opinion!)
Minimum company criteria: Share price above $1.00, market cap above $75 million, major stock catalyst from October 2023 to June 2024.
Even more disclaimer: If interested in any of these companies, consult company filings for background and information on risks and uncertainties. This is for idea generation and for informational purposes only.
Companies mentioned below for quick reference:
PNT, REPL, CHRS, FDMT, AADI, LBPH, ACRS, BBIO, FUSN, KNSA, LRMR, ATXS, CGEM, GLYC, LYRA.
These are all long ideas. (I’m long only and really bad at shorting - sorry!)
“Confidence” below reflects chances the primary endpoint will be hit not the chances that the stock will be long-term successful. I try to give a full picture in the writing of my enthusiasm and some of these are a little more enticing to me than others but I hope all beat the XBI average over the long haul.
Point Biopharma
NASDAQ: PNT
mCRPC Phase 3
Share Price: $7.04
Shareholders Equity Per Share: $4.23 as of 6/30/23
Shares Outstanding: 105,724,215 as of 6/30/23
Market Cap: $744 million
Thesis: Great rPFS run-in data for SPLASH trial blunted by deal with LNTH which killed stock price. Deal value still at least $10 (closer to $15) per share assuming trial success and company receives the sales milestones for PNT2002 up to blockbuster status ($1b gross sales per year). Also get nice royalty rate (20% net) and COGS+ payment for manufacturing. Solid tumors expressing fibroblast activation protein-a (FAP-a) Phase 1 data in 2024 and alpha emitter data (Ac225, PSMA) in late 2024/early 2025 are pure upside assuming mCRPC Phase 3 goes as expected. LNTH deal was widely panned but de-risked the launch. They definitely gave away upside although LTNH is a logical and excellent partner. Run-in patient data showed rPFS of nearly a year, much more than the 8 to 9 months expectations. Comparator arm will likely be 4 to 5 months. Seemingly a well-powered and designed study that should hit with a high bar, although data will be immediately compared to Pluvicto to see if roughly the same. Goal in commercialization would be to take half of the market. FAP-a data also should be in the next 9 months and provides high upside with limited downside. FAP-a target was “the talk of” recent radiopharmaceuticals conference, PNT is one of first movers to human PoC but seemingly getting no credit for it. Candidate selected in FAP comes from newer discovery program that is hopefully producing more selective candidates. Behind FUSN’s alpha emitter candidate (Actinium) for PSMA target but if FUSN has toxicity issues, PNT is a nice hedge as they believe their candidate is more selective. Alpha emitters are holy grail of radiopharmaceuticals but toxicity can be permanent and life-altering. Still, a greater need for better late line therapies and a lot of eligible patients who eventually fail Lutetium products.
Risks: Four cycles of therapy in SPLASH trial vs. six for Pluvicto could lead to underperformance (although physicians do not seem to think the 5th and 6th cycle do much), physician incentives for payment may prefer a product with more cycles to make more money, Novartis has been approved for years with an established sales force and large commercial war chest. Novartis supply chain problems seem to have been mitigated for now. Always a risk of unexpected data failure or worse than expected product profile but run-in data was well received as extremely bullish when released.
Confidence: High
Estimated Downside On Worst Case Scenario: -60%. A primary endpoint failure after the excellent run-in data in rPFS would be highly unexpected and a big setback for the company even though they already received the upfront money from the LNTH collaboration. The stock is pricing in a modest amount of royalties and milestones currently, although less than I think they will ultimately receive. AFAIK, nothing priced in for FAP-a now but a near-term failure or set back in mCRPC should impair the whole platform value to some degree.
Replimune
NASDAQ: REPL
CSCC Phase 3
Share Price: $16.6
Shareholders Equity Per Share: $7.75 as of 6/30/23
Shares Outstanding: 66,367,702 as of 6/30/23
Market Cap: $1,101 million
Thesis: Never produced a bad data update since being a public company really. Building on a validated base of Imlygic but greatly improved platform in virus selection, payloads, and indication selection. Even though only open label data so far with relatively few patients, excellent CR delta compared to natural history of CSCC patients receiving PD-1. Two ways to win on the primary endpoint with either CR rate or ORR although CR far likelier to hit and needs a 15% absolute delta on either. Products should be well received to commercialize in CSCC with relatively simple supply chain, surface lesion administration, favorable COGS, and straightforward provider education. Following CSCC update there is melanoma update (although skepticism if they can file directly on that data), RP2/RP3 CRC update in mid 2024, along with other trial initiations. Amazingly stock is under $20 when after the very first CSCC open label update it closed around $20 IIRC. Three years of progress and stock is eventually flat heading into first randomized, pivotal data.
Risks: Many bear theses… They are using mRECIST1.1 which as far as I could tell is the same standard $REGN was held to, primary endpoint was moved from 27 weeks to 40 weeks with reasoning being administrative issues over scheduling biopsies and scans, over enrollment of study leads bears to think effect size is weakening, lack of clarity around melanoma regulatory strategy, no previous randomized controlled data ever and only open label n=17 Phase 2 data in CSCC, investor distrust of oncolytic viruses in general after Imlygic disappointed, high burn rate of cash pile.
Confidence: Medium
Estimated Downside On Worst Case Scenario: -70%. As mentioned above, Replimune’s grand vision means that if any major setbacks occur this will trade lower than shareholder equity because the burn rate is massive and they are continuously entering into new trials assuming success of the RP1/RP2/RP3 platform. CSCC seems like an indication tailor made to deliver good results and be an easy first to market so randomized data has to deliver or it will be painful for shareholders.
Coherus
NASDAQ: CHRS
Launches of Udencya (autoinjector and on-body injector)/Cimerli/Yusimry Launches
Share Price: $3.97
Shareholders Equity Per Share: Negative as of 6/30/23
Shares Outstanding: 87,269,614 as of 6/30/23
Market Cap: $346 million
Thesis: Cimerli seems to be having an excellent launch as of receiving Q-code in April and should follow through over the next few earnings reports, Udencya OBI should be approved EOY (Editing note: this was written before the news of a third party vendor issue) and I’m interested to see if doctors find the recently launched auto-injector compelling like I do, Yusmiry launch confuses me especially with the Cost Plus Drugs stuff (Is anyone really paying $12k out of pocket for a drug per year?) but quite possibly they understand dynamics I do not. Biosimilar CCO seems rock solid, CEO is lacking but seems to be mostly staying out of the way for now. I have long been a critic of I-O ambitions but Tori launch will finally bring that regulatory saga to a close (let us pray) and SURF transaction was logical and cash accretive but at a dilutive cost. But they did what they had to do because the raise before was panned. I could see a future now where a Chinese made PD-1 and TIGIT are fast followers to indications where the science has already been proven and if it doesn’t work it’s not detrimetnal to my core thesis which is biosimiliar success in Cimerli and Udenyca. NPC indication isn’t much but Coherus could use any sales and inventory conversion to cash while waiting for inflection to profitability in biosimilar side of the business. They will have to pay a milestone upon NPV approval but the balance sheet is in a better place now.
Risks: Shaky CEO and CFO let company run way too close to running out of money and I don’t fully trust their judgment in some matters, Humira low list price strategy is unproven and risky when we have heard forever it’s about managing the rebate game and politicking for PBM formularies and not about having the absolutel lowest price, continued drag from Chinese PD-1 approval process which never ever seems to conclude or die, Udenyca OBI won’t be approved until late in year and auto-injector demand is purely theoretical at this point, Cimerli expectations are now higher and with high expectations comes a higher hurdle to clear each quarter.
Confidence: Medium
Estimated Downside On Worst Case Scenario: -40%. If Coherus stumbles again I expect the stock to revisit the 52WL as investors will yet again be frustrated by another false start and a longer runway to regain profitability. There is no real shareholder equity or cash pile underpinning this so it’s important for management to accurately convey expectations and make incremental progress towards mitigating cash burn each quarter. My biggest worry is that Yusmiry expectations are too high and the market will take longer to form and shake out than expected and that their strategy of low list price, high supply guarantees, and direct to consumer sales through Cost Plus Drugs proves to be a failure.
4D Molecular Therapeutics
NASDAQ: FDMT
CF Phase 1b/2
Share Price: $13.02
Shareholders Equity Per Share: $8.45 as of 6/30/23
Shares Outstanding: 38,429,934 as of 6/30/23
Market Cap: $500 million
Thesis: High dose CF cohort update will be exciting solely for now getting to see data in at least six modulator-ineligible patients, up from three, with longer follow-up in first three patients as well. Lower dose already has good expression and transduction so not sure doubling dose can help much with efficacy but if it’s safe can give confidence on safety in dose expansion. Durability data is probably most important with the pricetag expected and how fast these patients decline. Seeing a durable effect in a few patients might give skeptics more confidence this is actually working. People accused the company of being scammy for only reporting three patient data with short follow-up but that’s what they had…of the three patients, one improved and one stablized, albeit on a highly variable FEV1 measurement. If, let’s say, 4 or 5 patients stablize or improve in the next update, will people start to believe in the program a bit more as well as the potential in A1AT? Modulator-ineligible patients should also be on a fast path to market with potential single arm pivotal trial in relatively small amount of patients. Rocket just got guidance to do a single arm, 12 patient trial for Accelerated Approval in Danon Disease. Additional catalysts include updates to the ophthalmology programs (wAMD, DME, plus information on GA candidate) and a possibility of lifting the Fabry clinical hold in cardiology.
Risks: No approved therapies in CF modulator-ineligible patients partially because it is so hard to treat, so many variables so hard to tell based on three patient data if they are really on right track or just got lucky (or are scammy as bears claim), unclear durability and not sure if redosing will be an option, unclear what price will payers pay to stabilize these patients per year, pivotal trial could have a primary endpoint at 24 months or beyond and utilize not only FEV1 but composite scores as well to make sure no placebo effect. Eye programs could have unexpected or unforeseen tox pop up at any time and Fabry might never come off hold if FDA feels like being stringent.
Confidence: Medium
Estimated Downside On Worst Case Scenario: -20%. I still feel very little expectations are built in for CF gene therapy and the high amount of cash on the balance sheet buffers this against any setback in the lung. I feel this is one of those companies people love to hate on even though I feel they have made real progress in gene therapy so any setback might be treated a little harsher than others but I still have a hard time even seeing more than 20% downside if CF program were discontinued given the outsized focus on the wAMD and DME programs. Although those will have data in the next nine months so good to be aware of the risk there as well. But what can I say, I think it all has a decent chance of working and the company has been well-managed with raising capital and minimizing dilution plus they could still possibly do more non-dilutive deals around other non-core assets like they recently did with Astellas.
Aadi Biosciences
NASDAQ: AADI
TSC1/TSC2 Phase 3 Interim
Share Price: $5.22
Shareholders Equity Per Share: $4.89 as of 6/30/23
Shares Outstanding: 26,879,089 as of 6/30/23
Market Cap: $139 million
Thesis: mTOR blockers are a validated oncology mechanism, nab-sirolimus has a chance to be best in class based on PK and concentration in tumor. Already approved in PEComa with annualized sales at $25m annualized less than 18 months after launch. All eyes are on TSC1/TSC2 basket registrational study with interim data at EOY, company presents three studies to support: the subset of TSC1/TSC2 patients in PEComa trial, expanded access program in TSC1/TSC2 alteration PEComa patients with previous mTOR inhibitor therapy, and expanded access program in non-PEComa patients with TSC1/TSC2 alterations. Very high ORR in PEComa TSC1/TSC2 patients IMO shows perhaps this is less about PEComa specifically, activity in patients that previously failed mTOR demonstrates showcases best in class PK/PD, and expanded access program shows possibility can be effective outside of just PEComa tumors. Intratumoral accumulation shows 12-fold higher doses than everolimus achieves. Other catalysts that could be announced include a new permanent CEO, higher than expected PEComa sales, and announcement of completion of enrollment in TSC1/TSC2 study in early 2024.
Risks: Everolimus only had 2 PRs out of 32 patients in a similiarly designed study which is concerning but if nab-sirolimus really has efficacy where mTORs have failed before and does get 12-fold the concentration into the tumor compared to everolimus (and 43-fold higher than sirolimus) then that would make sense. Tumor agnostic approvals are tough and the company would likely need 30% ORR or possibly even higher. Commercialization might be a struggle if there is no clear trend in what tumors work as the target physician profile to detail would be way too broad for a small biopharma. Company seems to attract very little interest even for a unique oncology asset which is a red flag. Probably raised all the cash they can at this point and just have to hope the interim shines on them with some good results and possibly even a little luck given the small sample size and likely broad range of tumor types.
Confidence: Low
Estimated Downside On Worst Case Scenario: -40%. If Aadi can eventually grow Fyarro sales to $50m to $100m that would provide some level of safety as a small acquirer might look to roll it up or merge with the company and slash salaries once peak sales are achieved. While Aadi seems cheap-ish, it’s definitely not at a liquidation value so there is some movement riding on the results of the 40 patient interim data at the end of the year but I think the company did the right thing waiting for a large sample size. TSC1 or TSC2 can work independently so both arms of the study don’t need to be successful but then the story gets even more messy and regulators might want to know why one works when one doesn’t. My working assumption is they both will be roughly equal but interim data cuts can be messy but at least this one has some actual upside from an efficacy perspective. I think not many are expecting 30%+ ORR with any kind of durability at this valuation. However, I’m really not sure what is being priced in though and the stock is toiling around the lows so it might take something spectacular to break the downward trend.
Longboard Pharmaceuticals
NASDAQ: LBPH
DS/LGS/TSC/DEEs Basket Phase 2
Share Price: $5.55
Shareholders Equity Per Share: $2.53 as of 6/30/23
Shares Outstanding: 22,968,920 as of 6/30/23
Market Cap: $127 million
Thesis: Two drugs (fenfluramine, lorcaserin) have shown anti-seizure activity at the 5-HT2C receptor, drug showed activity in four out of six preclinical models, Phase 1 showed appropriate PK/PD with TID dosing, qEEQ findings in Phase 1 seem to trend in right direction but hard for me to parse what they are saying exactly. Even with suboptimal selectivity/PK the fact that fenfluramine and lorcaserin show activity is very interesting to me especially when you consider they might be leaving a little efficacy on the table in addition to their safety issues. Company even has rights to a lorca royalty stream if that drug succeeds in a Phase 3 for DS with the chance to leapfrog over it with a better agent. There exists a big unmet need in DS/LGS plus they are looking at TSC and other DEEs, really like the breadth of market and the chance to do something good for children burdened by so many seizures. I have had good luck with predicting seizure trial results in the past because PK/PD seems to pretty directly translate as long as the target is truly validated.
Risks: The two other drugs mentioned above may be “dirty” in that they hit other receptors and there is a chance something else is driving anti-seizure activity, not 5-HT2C. Basket study bar for success is unknown even with a placebo arm because 4:1 randomization and the sheer diversity of DEEs will make stratification really difficult. Illiquid name even with the offerings which could be good or bad after a major event. Pfizer owns a chunk of the company after the Arena acquisition but unclear if they care at all about the company and they might liquidate before or after data for any reason, even one that is not clear from the outside.
Confidence: Medium
Estimated Downside On Worst Case Scenario: -80%. Even though they are other neuro GPCRs in their pipeline and this is a “platform” company if LP352 looks close to useless or uncompetitive I think the whole company is marked pretty close to zero as this as close to a binary event as they could have especially because they have building to this PoC readout for like 18 months and chopping other programs to conserve cash. Data pretty much has to be decent or there is likely no bid to get out of the position for anything other than pennies. Risky!
Aclaris Therapeutics
NASDAQ: ACRS
RA Phase 2b
Share Price: $6.66
Shareholders Equity Per Share: $2.54 as of 6/30/23
Shares Outstanding: 70,769,702 as of 6/30/23
Market Cap: $471 million
Thesis: Less than 50% odds of success are being placed on the Phase 2b by my calculation. Assuming a $15/sh (or more?) price target on competitive efficacy, clean safety, and a single go forward dose (due to novel MoA, oral RoA, and an indication with > 250k patients) and $1.5/sh price target on failure (liquidation value based on cash, “soft JAK” topical asset value, and ITK/JAK3 systemic JAK value) then the stock is EV+ if you think probability of success is > 40%. MK2 inhibition has been researched since 1999 to block pro-inflammatory effects of p38a axis. Aclaris probably has best shot in history of making MK2 work as Phase 2a showed no weakening of effect “tachyphylaxis” like past MK2 inhibitors have shown. Possibly due to locking MK2 into an inactive state. Some concerns about CPK increases but in hidradenitis suppurativa trial increases were relatively balanced with placebo and more importantly no muscle pain or weakness, KOLs seem to not be worried about it. Phase 2a in RA only had two placebo patients (neither responded) which practically made it a single arm trial. But 15 active arm patients did have competitive ACR rates and DAS-28-CRP reduction. Running the Phase 2 hidradenitis suppurativa trial was a disaster for company, had low probability of success and killed the stock price but did provide safety information, show similar hsCRP reduction as RA trial as well as similar cytokine knockdown to healthy donor levels, and provided more confirmation of no tachyphylaxis based on biomarker data.
Risks: HS trial did fail all endpoints and PK parameters did not correlate at all with responders so concerning read to RA trial which you have to hope is a wildly different disease (it is but there is a little crossover re: affected cytokines), CPK elevations if found in Phase 2b will be scrutinized even if no muscle weakness is experienced and may depress any stock pop, investments based off of small Phase 2a trials with so few placebo patients are a big gamble, meta-analysis of last 20 years shows placebo rates are rising in RA trials (ACR20 of 30%, ACR50 of 15%, ACR70 of 5% on average now) and they probably need a 25% delta (h/t S.K.) on ACR20 to beat placebo thus need 55% in active arm (Phase 2a ACR20 was 9 of 15 patients for 60% so cutting it close), company has guided to partnering before Phase 3 but will probably still raise money on any kind of success which will also be an overhang.
Confidence: Low
Estimated Downside On Worst Case Scenario: -80%. As mentioned above I think $1.50 is a reasonable estimate on a total flop in RA Phase 2b which would be below cash but not assigning much value to the topical soft JAK asset for atopic dermatitis which could be sold off (if there is a market for atopic dermatitis topicals now) and the ITK/JAK3 for UC which is promising but so, so early in a flooded market.
BridgeBio
NASDAQ: BBIO
ADH1 Phase 3
Share Price: $26.34
Shareholders Equity Per Share: Negative as of 6/30/23
Shares Outstanding: 160,535,435 as of 6/30/23
Market Cap: $4,228 million
Thesis: Everyone is so focused on ATTR and achondroplasia (I can’t blame them) that this catalyst gets very little attention. And I don’t think it will move the stock up big but it will be nice validation for BridgeBio management if they can get a third asset with an established NPV with a potential 4th and 5th asset (LGMDi2 and CAH) that will progress to pivotal trials and PoC data respectively soon. So in a way success in ADH1 is more about validating BridgeBio’s pipeline management and asset selection but I also think there is actual commercial potential here. A small molecule for a large orphan indication with no approved therapies and low COGS. This would be beneficial for achondroplasia too since it’s the same physician call points and lets them work out the kinks of their field force ahead of the achon launch. Easy endpoint to hit in a Phase 3 trial (raising blood calcium and lowering urine calcium) with a predictable standard of care comparator (Calcium/Vit D), small target enrollment needed with 9 sites open now so hopefully no more delays. There will also probably be achondroplasia enrollment updates too (pivotal trial guidance just PR’d) in the next nine months along with a formal starting of the Phase 3 which is already identifying patients.
Risks: Trial results have been delayed twice now which means maybe finding the patients isn’t quite as smooth as they thought or they had clinical site operational difficulties. Orphan drug launches can be hard to predict and some just are not able to identify the patients for treatment even though they are out there. Unclear how much existing patients are struggling on SoC with low blood calcium and high urine calcium or what kind of pricing the market will tolerate. Third program in importance to the company so upside on bullish results might actually be quite minimal but I view this as somewhat of a thematic play on the whole company becoming more attractive over the next nine months as their vision begins to play out across all programs.
Confidence: High
Estimated Downside On Worst Case Scenario: -20%. Even this is likely overstating it because, again, the market does not seem to care about ADH1 but a Phase 3 fail is never a fun press release to see and BridgeBio stock has been a little weak ever since the Phase 3 ATTR results. Having a high profile negative headline might contribute as part of a -20% dip in total but I think a lot of buyers would step in at that point for the underlying value of ATTR and achondroplasia. Then again, I already think the sum of both are undervalued so who knows?!
Fusion Pharmaceuticals
NASDAQ: FUSN
Post-Lu mCRPC Phase 2
Share Price: $2.43
Shareholders Equity Per Share: $3.06 as of 6/30/23
Shares Outstanding: 66,277,279 as of 6/30/23
Market Cap: $161 million
Thesis: I guess I love radiopharmaceutical stories because here is a second radiopharmaceutical name on the list. Fusion has data in early 2024 also targeting mCRPC but for their 225Ac product, an alpha emitter product a patient would receive after a 177Lu products fails. Point’s pivotal data coming up is in 177Lu but they also have a 225Ac product but Fusion is roughly 18 to 24 months ahead of them. Using 225Ac is one of the more idealistic targets in radiopharmaceutical treatment because it is very potent so if you don’t have a selective agent you can cause massive and permanent toxicity. I have little doubt Fusion’s product will be potent and getting to the PSMA target but selectivity and safety are a question. Point has claimed better selectivity for their 225Ac ligand which improves 3x over their 177Lu product and I can’t find similar data for Fusion but they licensed from a high quality source. Data has been reaffirmed for early 2024 with a decent sized n and enrollment seems progressing well. Data will be both in patients that are naive and that have failed 177Lu. There is a thought that if 225Ac is safe eventually all 177Lu products will be replaced and 225Ac will move up the lines of treatment but I think there would need to be stellar safety for that to happen and these changes tend to happen slowly anyway. That wouldn’t be bad for either Fusion or Point though, in fact, it would be very good if possible as it would cut Novartis out of the market and Point licensed out their 177Lu. Even if that doesn’t happen there is still a big unmet need in late line therapy so Fusion and Point could split just that market and do very well. There also will be updates in the next 9 months on their FPI-1434 program which targets solid tumors expressing IGF-1R too but the market doesn’t seem to care about their unique hot/cold construct which seems to get decent exposure so far. Complete call option there and the whole company basically feels left for dead right now.
Risks: Toxicity, toxicity, toxicity. Competition from well-funded Point who could close that 18 to 24 month development gap if they became more aggressive funding concurrent late-stage studies. Point’s program might also have been better selectivity but the jury is out on that for now. Company’s stock price is just anemic which will make raising money harder in the future but they are well-financed at the moment and it’s so cheap for arguably the only biotech pure play in alpha emitter therapy.
Confidence: Medium
Estimated Downside On Worst Case Scenario: -60%. If their 225Ac product is a mess I think Fusion would fall far below book value and would also have trouble financing the rest of their early stage pipeline. They would also have a very hard time competing with Point if Point shows a better safety profile in 2025. But the low valuation and the chance to be a first-to-market 225Ac PSMA product makes the risk worth it even if this stock has been nothing but a pain to shareholders so far.
Kiniksa Pharmaceuticals
NASDAQ: KNSA
KPL-404 RA Phase 2
Share Price: $17.61
Shareholders Equity Per Share: $5.75 as of 6/30/23
Shares Outstanding: 71,634,729 as of 6/30/23
Market Cap: $1,261 million
Thesis: A potential best in class CD40/CD40L (CD154) blocker for autoimmune conditions but they are the first company to try this class of medicines in rheumatoid arthritis…foolish or brilliant? I’m okay with Kiniksa taking some risks as the main value is buoyed by the excellent Recurrent Pericarditis launch and my confidence that will eventually be a blockbuster and beyond. KPL-404 is a nice upside shot on goal. RA as a target for this mechanism is rather logical (T-cell dependent, B-cell mediated), challenge data from Phase 1 looks good alongside PK/PD work using the subcutaneous route, does not seem to cause issues with platelets, and the CD40/CD154 class has already shown efficacy in SLE including Biogen taking dapirolizumab pegol into Phase 3. It will be interesting to see Aclaris read out in Phase 2b ahead of them to set the bar for a novel mechanism in RA (unless they completely fail) and what the competitive field will look like. Patients can cycle through a lot of therapies so there should be room for multiple new players. Aclaris added roughly a billion dollars of value when their oral MK2 had nice results in Phase 2a for RA so upside potential exists on this readout. If Rheumatoid Arthritis doesn’t work they could potentially pivot to SLE, Sjogren’s, Graves Disease, or other conditions with a partner or sell it off to buffer the balance sheet.
Risks: There are seven other drugs targeting CD40/CD154 many from companies even more well-financed than Kiniksa so plenty of competition will come into the space. This being the only company to go forward in a RA trial has me worried but it’s already near full enrollment so it’s a sunk cost at this point. Kiniksa is essentially cash flow positive right now so if they strike gold then funding a Phase 2b/Phase 3 program wouldn’t be a problem and they should be first to market. But they may explore partnership deals on a win as this asset doesn’t fit into their core competency of CV disease at the moment.
Confidence: Low
Estimated Downside On Worst Case Scenario: -20%. I feel like I’m the only one really paying attention to this catalyst right now but interest may pick up as enrollment finishes and the data approaches. But the main value driver will be sales and protection of IP for Arcalyst in RP and acquiring or developing other cardiovascular assets so I don’t feel there would be a harsh market reaction in the worst case scenario that KPL-404 just quietly just went away.
Larimar Therapeutics
NASDAQ: LRMR
FA Phase 2
Share Price: $4.49
Shareholders Equity Per Share: $2.28 as of 6/30/23
Shares Outstanding: 43,897,603 as of 6/30/23
Market Cap: $197 million
Thesis: Freidrich’s Ataxia is an indication wide open for better therapies even after the $7 billion Reata acquisition. Design Therapeutics’ Phase 1 data looks like that construct is a non-starter. That leaves Larimar as one of the few (only?) pure play companies set to deliver a meaningful dataset over the next 9 months. I don't necessarily love management or the platform. I have concerns about the ability to cross the blood-brain barrier and the safety of the drug after pre-clinical NHP deaths. But even if the drug could just increase frataxin in the heart and dorsal root ganglia it could possibly deliver benefit better than Reata saw in their studies. Each passing day that goes by without a new clinical hold slightly increases the chances that management found a safe steady-state dose for long-term usage. The 50mg dose in an earlier study seemed to produce frataxin increases and to be fair they have never had a safety problem in humans, just NHPs at higher doses, but the potential narrow therapeutic index does worry me. The company has said “generally” they have a 10x safety margin from the dose level that produced deaths in NHPs but I hope they have a good handle on PK and steady state accumulation. Lord knows they have tested enough at this point between the 25mg and 50mg dose exploration cohorts that they should have a robust PK model at this point.
Risks: Narrow therapeutic index, possible lack of CNS effects, still years ahead of them in development because it’s unclear what a pivotal trial will look like with an approved agent, management has a history of doing massive dilution and the longer the stock price stays depressed the more likely painful dilution is to occur.
Confidence: Low
Estimated Downside On Worst Case Scenario: -60%. I can see the stock down at least this much if any serious safety issue develops or if efficacy looks to be lacking at the 50mg dose cohort. Considering the 25mg dose is already showing effects in buccal frataxin and other measures that were nearly statistically significant I don’t expect underdosing to be a problem but of course I worry about safety, now and forever.
Astria Therapeutics
NASDAQ: ATXS
HAE Phase 1b/2
Share Price: $8.36
Shareholders Equity Per Share: $7.15 as of 6/30/23
Shares Outstanding: 28,022,306 as of 6/30/23
Market Cap: $234 million
Thesis: Pursuing a validated target in a well-understood disease (HAE) with a relatively simple PK modification using technology previously utilized in Evushield, an approved product. YTE modification enhances pH-dependent FcRn binding, lengthening half-life by months. The question is not if they can get every 3 month dosing which, based on human volunteer data seems to be very likely, but if they can extend to q6mo dosing. The product is not dead if only q3mo but q6mo would a much more compelling profile compared to possibly Ionis (q1mo or q2mo), PHVS (qd oral), future KALV product (qd oral) or NTLA (permanent cure but with unknowns attached). Two subcutatenous injections a year is quite attractive especially if the attack rate reduction matches best in class incumbents with clean safety.
Risks: Highly highly competitive field which likely will not support ultra-high orphan pricing forever with all the entrants coming into the market, not clear if q6mo will be possible or if attack rate will start to spike in the last month or two as concentrations of the drug decrease. Only data to date has been healthy volunteers so there is a chance of a black swan event where the drug doesn’t work in actual HAE patients as anticipated. But I think that is unlikely and the focus will be more on durability of a single injection.
Confidence: High
Estimated Downside On Worst Case Scenario: -50%. In a situation where the attack rate reduction or duration comes in way below estimates I think the stock would fall far below book value and the company would be pressured to liquidate or reverse merge given all the competition in HAE and the fact that a Phase 2b/3 combined program would take years and cost over $100 million.
Cullinan Oncology
NASDAQ: CGEM
CLN-619 Pembro Combination Dose Escalation Data
Share Price: $10.14
Shareholders Equity Per Share: $12.50 as of 6/30/23
Shares Outstanding: 39,952,000 as of 6/30/23
Market Cap: $405 million
Thesis: CLN-619 is a secondary program for Cullinan but it feels like market has ignored some promising early monotherapy dose escalation numbers. In June, Cullinan reported ORR of 13% at Dose Level 3 and above across a variety of tumor types and a DCR of 45%. At Dose Level 3 and above for gynocological malignancies the ORR was 20% with a DCR of 70%. Cullinan hasn’t even done a full dose expansion at the higher doses and they already have some promising leads for cancers that may respond and the safety profile looks fairly benign so I think dose expansion at Dose Level 6 (10mg/kg) should be feasible and combination therapy should be well tolerated. An interesting slide in their deck shows how LAG-3 and Anti-TIGIT both had 0% monotherapy activity in their Phase 1s with LAG-3 having a 41% DCR and Anti-TIGIT having a 17% DCR. Since then, LAG-3 is an approved combination therapy in Advanced Melanoma and it looks like at least one Anti-TIGIT will eventually be approved in combination for High-PD1 NSCLC based on leaked Roche interim analysis that came out slightly before I’m writing this. So the fact that Cullinan saw any monotherapy activity, has already been able to identify areas of interest (plus NSCLC will be looked at), and can likely dose expand at higher doses even in combination is intriguing especially because data will continually flow twice a year from here on out as the combination and monotherapy cohorts accrue patients. Having two monotherapy responses in endometrial cancers is especially interesting because there might be less competition there compared to lung cancer, skin cancers, etc. Another encouraging sign from the monotherapy initial data was how heavily pre-treated the patients were as a whole. The company has a sizeable cash pile to see through all their programs (soon to be six in the clinic) and has already stated they will be rather ruthless cutting or selling off the less promising programs to fund the better performing ones.
Risks: The combination data will be an all comers data set and probably with very few patients treated with pembro + 10mg/kg dosing so this may be too early still for a definitive PoC. Company is trading under cash but that cash will be used up funding the NSCLC exon 20 pivotal program (even with a 50/50 cost share with Taiho) and they also have an AML program, B7H4x4-1BB for various solid tumors, B-cell NHL program and pan-cancer IL12-IL2 fusion protein program…the sheer scope of the company might work against it in investors’ eyes as the sum is valued as less than the parts due to the large cash burn ahead and perceived lack of focus.
Confidence: Medium
Estimated Downside On Worst Case Scenario: -20%. Cullinan did not get much reaction on an initial promising signal for CLN-619 so if combination therapy does not show any additive effects I don’t think there would be much downside as most investors simply aren’t aware of this program and the focus is on their Zipalertinib program in EGFR ex20 NSCLC 1L and 2L.
Glycomimetics
NASDAQ: GLYC
AML Phase 3
Share Price: $1.48
Shareholders Equity Per Share: $0.85 as of 6/30/23
Shares Outstanding: 64,276,184 as of 6/30/23
Market Cap: $95 million (was over $100 million at time of selection and writing)
Thesis: Alright, I know this sounds stupud. I know an oncology company heading into a Phase 3 readout at an extremely depressed valuation is likely to fail. I know AML trials are very likely to fail. Fully acknowledge that. But after following this company for five years, I feel I have to try to take a bite of the poisonous apple here. Looking back to their Phase 2 data (from 2018!), in R/R AML they really did improve over the historical CR/CRi rate with impressive MRD negativity rates as well. In addition, the patients with a higher amount of e-selectin living longer would seem to validate the drug’s mechanism. Yes, it was open-label. Since then the stock price has basically evaporated due to the long timeline to get this study completed, dilution, but mostly because their trial in SCD vaso-occulsive crisis failed which constituted a “platform” failure. Now I think that trial had separate issues but I can’t find any instance where the AML program itself has really produced bad data. Furthermore, if you wanted to look at a reason to be bullish, in an event-based (overall survival) study, the study has taken way longer than expected because the blinded blended population of patients is living far longer than expected when the study was designed and powered. Certainly great for patients and if the increase in survival is primarily driven by the drug arm great for the company and the science. It’s a big leap and we have of course seen SoC arms over-perform in oncology studies but considering how sick R/R AML patients are and the limited options they have I think it’s really encouraging patients are living so long. Now the FDA has allowed a time-based responder analysis so we will definitely (finally!) get results in Q2 2024 one way or another. I have this sized smaller due to the outsized risk but I still want to see this idea to the end. Your mileage may vary.
Risks: The “glycobiology” platform has a past Phase 3 failure but a different drug and indication, AML is a drug development graveyard where Phase 3 studies rarely work, small oncology companies very rarely hit in Phase 3 when entering the data readout at such a low valuation. (“The Feuerstein-Ratain rule (or F-R Rule for short)- named after biotech journalist Adam Feuerstein and Co-discoverer Dr. Mark Ratain, is an observation about the results of phase 3 cancer clinical trials and how they correlate to the market capitalization of publicly traded biotech stocks.” -Red Acre Investments.)
Confidence: Low
Estimated Downside On Worst Case Scenario: -90%. This company is basically on its one and only chance. This is an all-or-nothing binary and I don’t think the company will have much value or cash if this trial fails.
Lyra Therapeutics
NASDAQ: LYRA
Pre-Surgical CRS Phase 3
Share Price: $3.71
Shareholders Equity Per Share: $2.26 as of 6/30/23
Shares Outstanding: 43,676,387 as of 6/30/23
Market Cap: $162 million
Thesis: Roughly same trial design and inclusion/exclusion criteria that led to a p=0.003 on the three cardinal symptoms (3CS) endpoint in Phase 2 but now in a much larger Phase 3 study that is probably ridiculously overpowered. Company has finally been executing with enrollment by moving up data timelines. A really clean story clinically heading into dual Phase 3s for LYR-210 with the Phase 2 in post-surgical also moving forward. (Data was also good for that!) Very binary outcome but if the company executes properly there is no reason a high dose fluticasone implant should not work in this indication and safety seems fine in the Phase 2 work. Competition and commercial risk is the bigger overhang but I thought this was a great tweet:
http://twitter.com/BiotechElmo/status/1700930159325421750
Risks: Lyra brought manufacturing in-house for clinical trial supply which always worries me when a small biotech is trying to learn manufacturing on the fly while also executing clinical trials. It’s probably fine but by far the biggest risk to me even when you talk about built from scratch facilities, tech transfer, etc…my only near-term concern is they mess up making the drug implant somehow and they don’t get the drug to the same area at the same concentration as in the Phase 2. Commercialization and peak sales are a nuanced conversation but I think the product profile and buy and bill economics make this an attractive product for physicians to offer to patients. The company still has a second Phase 3 needing to finish enrollment (and then read out) so need for funding might dampen some of the excitement of a first positive Phase 3.
Confidence: Medium
Estimated Downside On Worst Case Scenario:: -60%. A Phase 3 fail would be unexpected and catastrophic to the platform leaving this below book value and a candidate for liquidation or a reverse merger as they really have nothing else aside from LYR-210 and LYR-220.
At the time of this writing, I am long the 15 stocks written up in this article.
One more disclaimer: I reserve the right to change my future positions and, again, this is not advice or a recommendation to buy or sell securities. I am not a financial advisor!
Ten other ideas also considered and why I did not write them up:
BMEA, Diabetes Phase 1 Updates - unclear clarity from company on date for next diabetes update (likely IDF in December) and also unclear PoS or safety
CLRB, WM Phase 3 data - did not meet minimum market cap at the time of writing (since has done funding, might be interesting)
EQ, Alopecia Areata Phase 2 interim - did not meet minimum share price or minimum market cap
IMTX, PRAME T-Cell platform updates - unclear how much data will be provided or regulatory path
IMUX, PMS Phase 2 interim - did not meet minimum market cap
ITOS, SKYSCRAPER-01 NSCLC Phase 3 readthrough - unclear of risk/reward in light of heavy TIGIT competition
JSPR, CSU Phase 1b/2 - worries about competition and that the data will slip past June
MIST, AFib Phase 2 - unclear if market will care about data
THRX, IND acceptance - too minor of a catalyst
XFOR, Neutropenia Phase 1b/2 - lack of faith in management to execute currently
Follow me on Twitter at @MattBiotech. It’s a mess but until I move to Threads or Bluesky it’s the best option we have I guess.