Mid August, we published an article outlining the progress Heat Biologics Inc (NASDAQ:HTBX) had made with its development pipeline. We took a top down view of the pipeline, and pointed out a couple of key catalysts that we planned to focus on moving forward. Well, we just got an update relating to one of these catalysts, and its worth taking some time to delve a little deeper into the drug in question, and lay out a game plan for the coming few quarters.
So, here goes.
The latest update relates to the candidate we spent a little less time on in our last analysis – HS-110 in a non small cell lung cancer (NSCLC) target indication. Specifically, HS-110 in combination with Bristol-Myers Squibb Co (NYSE:BMY)’s nivolumab, which the latter currently markets as Opdivo.
Before we get into the trial, here’s a look at the science that underpins the MOA. The science on this one is pretty neat. It’s based on what the company calls its ImPACT technology. Basically, physicians extract lung cancer cells and modify them so that what are called gp96 proteins aren’t tethered to the cell (in normal healthy cells they are tethered and can’t leave the membrane). By untethering the protein, and reintroducing the cells to the body, the cell is engineered to start pumping out these proteins, which attach to dendritic cells and express an antigen that relates to the lung cancer cells. T cells attach to the dendritic cells, log the antigen, then detach and go hunting for any cells that express the same antigen.
Because the antigen initially came from the proteins expressed (and released) by the modified cancer cells, and the modified cells come from the natural cancer cells, the T cells (read: our immune system) recognizes the lung cancer cells as foreign. On recognition, it sets about destroying them.
This type of process is at the core of all immunotherapy candidates, but this specific gp95 protein approach is unique to Heat, and it looks like a very promising target.
What did the update reveal, and what are we looking for from the trial?
The company had stopped enrollment in a phase I/II (currently in the phase I part) while it looked at certain already collected data. The latest update let markets know that Heat has restarted enrollment, and that the company is on track to report data from the trial during the fourth quarter of this year.
There’s a huge potential market here. If Heat can demonstrate that its candidate is an effective adjuvant to Opdivo in NSCLC, it could quickly eat up a large portion of what would essentially become an Opdivo satellite sector – that is, a new market running parallel to that of Opdivo, limited only by Opdivo administration volume.
The latter generates a little over $300 million a quarter in revenues, and while we don’t have a prospective price point for HS-110 (it’s still far too early) it doesn’t take too much of a stretch to see this one generating low to mid hundreds of million dollars” worth of revenues on an FDA green light and an effective commercialization strategy.
The biggest risk right now is cash, and that’s got to be a near term consideration. We’ve stated in the past that Heat needs a partner, and while it’s got a couple of assets that would make attractive collaboration compounds, right now no one has come forward with an offer (at least not one we are privy to).
As such, Heat’s runway is rooted solely in the company’s cash position, which at last count (June 30) was just $7 million. Dilution could quickly become an issue if no partner steps forward.
This said, we think the company’s pipeline is robust enough for investors to be willing to accept and absorb some level of dilution, assuming it carries the candidates in question closer to registration.
We’re keeping an eye on Heat for any word on potential partnerships. Subscribe below and we’ll let you know when we get any news!
Disclosure: We have no position in HTBX and have not been compensated for this article.