Since my last article on Prima BioMed (PBMD) on August 1st , shares have declined from $3 to $1.27, giving the company a current market cap of $53mm vs. their $31mm in net cash today. In revisiting my thesis, I want to update thinking on the catalyst pathway ahead as well as the overall investment opportunity at current levels.
First, a brief review of the overall company and market position.
Prima styles itself as a leader in developing personalized immunocellular therapeutics for cancer. Its lead product, the CVac vaccine, is an autologous dendritic cell-based product, targeted at mucin-1 overexpressing cancer cells, and is indicated for the treatment of epithelial ovarian cancer in remission, after 1st or 2nd line treatment. The company has a strong IP position and is protected from bio-similar competition, and intends to seek Orphan designation for enhanced exclusivity in the US and EU.
Market Opportunity & Unmet Need:
Several immunotherapy approaches to management of ovarian cancer have entered the clinic in recent years. New treatment modalities are urgently needed in order to significantly improve the prognosis of women with epithelial ovarian cancer. The hope is that cancer immunotherapies may provide longer survival with lower toxicity than associated with more traditional cancer treatments.
According to the Cancer Research Institute, only modest progress has been made in improving overall survival in patients with ovarian cancer over the past 20 years. Although the majority of women with advanced ovarian cancer respond to first-line chemotherapy, most responses are not durable. More than 70% of patients die of recurrent disease within 5 years of diagnosis.
The poor survival in advanced ovarian cancer is due both to late diagnosis, as well as to the lack of effective second-line therapy for patients who relapse. The clinical course of ovarian cancer patients is marked by periods of remission and relapse of sequentially shortening duration until chemotherapy resistance develops.
Its addressable market is as follows: Ovarian Cancer has an overall incidence of 150,000 per year, with the targeted indication incidence at 35,000 per year between the US and EU7, with approximately 20k in the US alone. Current standard of care is debulking/platinum/Taxane/chemo, which has not changed significantly in 20 years. As such, there is a compelling need for an effective therapy that can be well tolerated and avoid the well known side effects of those agents. Given current biologic pricing of $75k-$100k a year, and an open addressable market in the US of 20k patients, the overall market potential for an agent in this class is $1.5b+ in sales per year.
Beyond ovarian cancer, the approximate incidence (in the United States and the European Union 7) for triple-negative breast cancer is approximately 100,000 per year; for metastatic colorectal cancer it is approximately 180,000 per year; for resectable pancreatic cancer it is approximately 18,000 per year. These represent upside opportunities as the data is less proven, in my opinion.
Recent Data: On November 11th, PBMD announced that In 20 patients in second remission on the CAN-003 trial, CVac conferred approximately a 50% increase in progression free survival as compared to observation only (7.69 months versus 5.14 months; HR=0.41; p=0.09). This compares to previous results of all progression-free survival data from its CAN-003 protocol, a 63- patient phase 2 trial of CVac for the treatment of epithelial ovarian cancer in remission after standard first- or second-line treatment.
Other Developments: On November 6th, PBMD granted NeoPharm an exclusive license to market & sell CVAc in Israel. Neopharm will reimburse Prima for commercial manufacturing costs of CVac and then Prima and Neopharm will split net profits from CVac sales in the License territory. Prima will also receive small up-front and development milestone payments. This agreement represents the first commercial corporate partnership for CVac and could be a signal of agreements to come. Established in 1941, Neopharm Group is Israel's leading provider of innovative integrated solutions across the pharmaceutical, medical and healthcare markets with turnover in excess of US$350M and 600 employees.
Upcoming Potential Catalysts & Considerations:
(1) Based on the preliminary data announced 2 weeks ago, PBMD will begin enrolling a 210-patient phase 2, multicentre, randomized, and controlled trial of CVac for the maintenance treatment of platinum sensitive, epithelial ovarian cancer patients who achieve remission after second-line platinum-based treatment. This trial will be conducted as an amendment to the CAN-004 protocol. The primary endpoint for this study will be Overall Survival (OS); secondary endpoints include progression-free survival (PFS), adverse events, and immune monitoring. Notably, PBMD will not enroll additional first-remission ovarian cancer patients onto the CAN-004 trial and that it will not commence trials of triple-negative breast and colorectal cancers. There are currently 76 randomized patients in first-remission on the CAN-004 trial; these patients will be allowed to continue on the protocol and will be analyzed separately to the second-remission cohort.
(2) PBMD will also move forward with a 40-patient pilot, multi-centre, single-arm trial of CVac for the maintenance treatment of resected pancreatic cancer patients. This trial will assess OS, PFS, adverse events, and immune monitoring.
(3) On December 11th, PBMD's recent CVac clinical trial results will be discussed at a panel entitled "Ovarian Cancer: Next Generation Immunotherapies" along with 3 physicians.
Solid Cash Position: $31m in cash remaining after September quarter with a current cash burn rate of $14m annually. Given the support from the German grant to defray trial costs and prudent cash management, the company should have at least 2 years runway (which removes financing overhang). In addition, due to its Australian domicile and tax structure, PBMD can also capture R&D tax credits which return cash to companies who do not earn a profit (as opposed to just generating NOLs in the US), which, in the pre-profit era, will also preserve cash position.
Caveats/Risks: PBMD is a small, illiquid, Australian based company, with a significant retail following (>13,000 shareholders) in Australia, largely due to the stature of the company's non-executive Chairman, Lucy Turnbull, who is quite well known (alongside her husband) by many Australian citizens. Given that the ADR is tied to the Australian liquidity, and the Australian share price is 0.09/share (trades 3mm a day or $270k a day), it still likely remains too small/illiquid for many funds, at this point. ADRs are directly related to the PRR shares on the ASX at a ratio of 30 PRR to 1 PBMD. Further, shares are likely to remain volatile due to the lack of volume. Anecdotal evidence suggests that ownership of the US listed ADR is likely around 7% today, vs. almost 0% 4 months ago, indicating that US investors are taking a harder look at the story, particularly at these levels.
Analysis of Risk/Reward: The real story here is that on the surface, the data looked like the treatment was fine for both patient groups. However, uncovering the differences among the patient groups, the 1st group (1st line) had some noise and will need to be re-done over the course of the next year (likely the cause of the severe stock decline), while the 2nd line treatment looked fine, and is being pursued further. The 2nd line treatment actually should be about 80% of the total market size as if the 1st line treatment had worked, and is a more homogenous patient profile from a characteristic baseline profile, hence better chances that the therapy works here.
So the setup for 2014 is that company is likely to restart the trial in 1Q/14 (Feb/March) for the 210 patients, and also read out on the overall survival for the phase II data that just reported in late 2014. The CAN 004 trial will start reading out in 2015, then after 1 year of survival data, the final data should arrive by mid 2016.
Summary/Thesis: Despite its small market cap and illiquidity, PBMD has an interesting technology platform, with good interim data and efficacy, addressing a 'wide open' market in ovarian cancer, and supported by a solid cash position. I believe aforementioned catalysts in 2014 will drive stock price appreciation into and behind the results, and that the market opportunity is significant enough to warrant a closer look at the company.