MabVax Therapeutics: Opportunity In Unmet Cancer Need

| About: MabVax Therapeutics (MBVX)

Summary

MabVax Therapeutics released positive interim results for two Phase I clinical trials that show potential for safely improving pancreatic cancer patient survival rights.

Pancreatic cancer has the lowest survival rate of the leading cancers due to the difficulty of detecting the cancer early enough for treatment leading to a large unmet need.

The company has the financing in place to complete the ongoing Phase I trials though any investor faces the potential binary event of the trial results.

Similar to other small biotechs, MabVax Therapeutics (OTCQB:MBVX) trades near its lows. The company offers hope for pancreatic cancer patients and recently released key interim safety results from Phase I clinical trials possibly reversing the downtrend in the stock's momentum.

Source: MabVax Therapeutics website

At $4, MabVax is a clinical-stage biotech with a market value below $100 million. Recent fund raising and an uplisting could position new investors in an ideal position in the biotech sector.

Pancreatic Cancer Death Sentence

The biggest problem with pancreatic cancer is that detection is very difficult at an early enough stage to help the patient. Without early detection, the survival rate of patients is one of the lowest amongst other highly deadly cancers.

The cancer starts deep in the stomach and usually isn't detected until the tumor spreads to the point that it starts impacting other organs or causes nerve pain amongst other signs.

For these reasons, the current survival rate of patients beyond five years is less than 8%. This low survival rate places pancreatic cancer as the lowest survival rate amongst the top 10 cancers.

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Source: Cancer.org

The survival rate is startling considering lung cancer is the only other top cancer where the survival rate is below 45%. Even when found soon enough with containment within the pancreas, the five year survival rate with a surgery is only around 20%.

The best case scenario for pancreatic cancer is worse than the typical scenario of other cancers where the average survival rate is 69% and improving fast.

MabVax Solution

Based on these numbers, pancreatic cancer has a clear unmet need. MabVax Therapeutics is one of the various biotechs working on a solution.

MabVax has a promising lead antibody, HuMab-5B1, derived from a patient vaccinated with a vaccine licensed from Memorial Sloan Kettering Cancer Center in New York. The patient has remained disease free for over five years now.

The HuMab platform has to led to a portfolio of fully human antibodies that can target pancreatic, ovarian, breast, SMLC and sarcoma cancers. The fully human antibodies have natural advantages of targeting specificity while minimizing cross reactivity.

The antibody has shown the initial potential to inhibit tumor growth in pancreatic cancer with the MVT-5873 therapeutic antibody and a standard of care chemotherapy.

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Source: MabVax presentation

Promising Pipeline

The company is working on the development of a pipeline of human monoclonal antibody products.

Based on pre-clinical tests, MabVax started two Phase I trials evaluating the use of MVT-5873 as a therapeutic antibody and MVT-2163 as an immuno-PET imaging agent in patients with locally advanced and metastatic pancreatic cancer.

The company has a promising pipeline and one that gets a lot more investor friendly as the Phase I trials take shape. The other programs will make progress in 2017, but naturally most of the funding will go towards the ongoing Phase I trials.

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Source: MabVax presentation

MabVax has limited funding now so the pipeline is probably irrelevant to current shareholders. Without successful Phase I data for MVT-5873 and MVT-2163, funding will become difficult and highly dilutive.

Phase I Interim Safety Results

The best part of investing in MabVax is that the biotech trades at the lows, but the company has already released interim Phase I data.

The MVT-5873 Phase I trial began back in February with Part 1 focused on the safety and determining the recommended dose for Phase II trials as a monotherapy. Part 2 of the trial will begin after the safety dosing levels are established and test the use of the therapy along with a standard of care chemotherapy.

The key news this week though a lot of the data was discussed during the earnings call in the prior week, MabVax released positive interim data points.

To date, the trial included 16 subjects treated that are primarily in stage 3 and 4 metastatic pancreatic cancer. These patients have failed all other treatment options and see this clinical trial as the last option.

Of the 16 patients, six continue to receive treatment while seven patients were noted with a stable disease lasting from three months to eight months. The key being that patients leave the trial if the tumor continues spreading and the investigator determines whether the patient continues on beyond the initial 28 day cycle. In essence, the patient isn't required to continue using the therapy beyond the initial cycle test, but clearly a good portion of the patients saw a benefit to continue using MVT-5873.

The successful results release the company to move forward with recruiting for Part 2 of the clinical trial with chemo.

In parallel, the MVT-2163 Phase 1 trial was initiated back in June. The initial results of two cohorts show promising data points. The new generation diagnostic PET imaging agent is intended to provide more information about internal organs and normal tissue pointing clearly to the targeted tumors. The imaging agent can be used to detect the disease and better monitor the treatment impacts of the dosage of MVT-5873.

The end result is a better image of the cancer tumors in comparison to the current options. The better that pancreatic cancer can be detected and isolated, the better outcome for patients.

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Source: MabVax presentation

Financials

Typical of any small biotech, the company is burning cash and requires further fund raising or a partnership now that key interim Phase I data proves to the market the safety of the therapy.

The stock began trading on the Nasdaq Capital Market back on August 17 after a reverse split. At the time, the MabVax raised roughly $7.6 million in an equity offering.

MabVax ended Q3 with $6.9 million in cash on the balance sheet. The biotech lost $4.4 million in the quarter with negative operating cash flows of $3.3 million leaving the company roughly two quarters of cash to operate at these cash burn levels.

With the readout of the interim data, Oxford Finance has agreed to finance an additional $5 million in debt that MabVax forecasts getting the small biotech to the conclusion of the Phase I trials in 2017.

With the Q3 report, the company listed 5.8 million diluted outstanding shares leading to the listed market value around $25 million or so. MabVax though lists 15.5 million fully diluted shares due to preferred stock and outstanding warrants and stock options that account for up to 9.5 million shares. The exercise price on the warrants average $6.84 per share so these shares aren't dilutive with the stock around $3.90. Regardless though, investors should consider the fully diluted market value as closer to $60 million.

With OPKO Health (OPKO) involved as a major shareholder, future financing probably isn't a huge problem as long as MabVax continues meeting milestones. The bigger issue is the dilutive impact of any financing deals assuming the company doesn't find a partner.

Anybody following the recent disappointing Phase III results of Novavax (NASDAQ:NVAX) that had raised cash balances to over $300 million in preparation of a vaccine approval, the amount of cash on the balance sheet isn't always as crucial as the clinical trial results. Novavax collapsed from $9 to nearly $1 based on a negative outcome to the trials as now even that large cash balance is questionable to provide enough funding for more clinical trials.

Substantial Risks

So while the financials are dicey, MabVax appears to have the required funding to get to the next milestones that if achieved would likely provide more access to funding. The bigger issue is that pancreatic cancer is an unmet need because finding solutions has historically been very difficult, a prime example being Momenta Pharma (NASDAQ:MNTA), which recently discontinued a Phase II trial for patients with advanced metastatic pancreatic cancer.

Considering the unmet need, plenty of competition exists in the sector with larger biotechs having bigger balance sheets. A search on Seeking Alpha using pancreatic cancer quickly discovers a long list of drugs in development.

The common risks of any small biotech with limited funding along with competition from large pharma that could get a solution to market prior to MabVax makes the stock a huge long shot. Not to mention, the recent political pressure on drug pricing could negatively alter the financial landscape for an approved drug years down the road.

Takeaway

The key investor takeaway is that MabVax trades at a lower stock price due to the high risk and the recent political pressure on drug pricing. The recent interim results and financing though could place the stock in a good position to make a run prior to final Phase I results next year.

Regardless, the stock is not appropriate for investors outside of those willing to take on substantial risks via a diversified portfolio. An investor in MabVax must know the complete loss of an investment if higher possible.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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