Mirati Therapeutics: Updates To Thesis, ASCO Winner Sans Data

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About: Mirati Therapeutics, Inc. (MRTX), Includes: AMGN
by: Jonathan Faison
Summary

Shares have risen by over 800% since my original article.

The stock has emerged as an ASCO winner, with recent gains due to promising initial data from competitor Amgen's phase 1 study evaluating AMG 510.

Management has a logical plan in place for ushering its KRAS G12C inhibitor MRX849 through the clinic in an expedited manner.

Opportunity in KRAS G12C is thought to be 3 to 4 times the size of the ALK mutation population. Pre-clinical data for MRTX849 appears impressive.

Further upside in the near term appears possible ahead of initial data in 2H 2019, but a position here remains speculative until proof of concept is achieved.

Shares of Mirati Therapeutics (MRTX) have risen by over 800% since my September 2017 article called the stock a Buy and noted it was poised to capitalize on the emerging theme of targeted oncology (much like prior picks in the space Loxo Oncology and Ignyta). A couple months later, I encouraged readers to "Buy the Dip" after the stock corrected on news that management was de-prioritizing glesatinib in favor of freeing up cash to push forward sitravatinib and its preclinical KRAS program.

Given that the targeted oncology theme shows little sign of cooling off and optimism is emerging around the KRAS space after Amgen's (AMGN) showing at ASCO, I'm looking forward to this revisit.

Chart

Figure 1: MRTX daily advanced chart (Source: Finviz)

When looking at charts, clarity often comes from taking a look at distinct time frames in order to determine important technical levels to get a feel for what's going on. In the above chart (daily advanced), we can see the stock's swift rebound in January as dosing moved forward for its phase 1/2 study for KRAS G12C inhibitor MRTX849. After consolidating in the $60 to $70 range, the stock again rocketed to new highs after Amgen's KRAS G12C inhibitor AMG 510 showed partial responses in 5 of 10 evaluable patients. Ironically, this may be the first time I've observed a stock to emerge as the primary ASCO winner without even having to present clinical results.

Overview

Early in 2018, I briefly reviewed management's presentation at Barclays and touched on a couple of key points to the bullish thesis:

  • Sitratvatinib continued to show promise in treating patients that progressed after being treated with checkpoint inhibitors, including early data showing a 27% response rate comparing favorably to third-line checkpoint refractor combos (7% to 11%) or even second line (14% to 19%). China partnership with BeiGene (BGNE) was interesting in that additional studies set to get underway that would enable expedited progress in the clinic and potential expansion into larger patient populations such as checkpoint-naive.
  • CEO Charles Baum seemed most excited about the company's preclinical KRAS program (inhibitor of G12C KRAS mutations specifically), a first-in-class asset with expression in 14% of lung cancer patients and 5% of colorectal cancer patients. This program was described as potentially "transformational" for the company, with preclinical data showing complete tumor regression. I noted that an early-stage clinical study would quickly be able to recruit patients with KRAS G12C mutations and hopefully show signs of efficacy early on.

Figure 2: Pipeline (Source: corporate presentation)

Interestingly enough, the latter point is now driving most of the value creation and momentum in share price at this point.

Catching Up to Speed

In mid-January, the company announced it had enrolled the first patient in a phase 1/2 study evaluating KRAS G12C inhibitor MRTX849 in patients with advanced solid tumors harboring KRAS G12C mutations. President and CEO Charles Baum, M.D., Ph.D., had the following remarks to add:

Today we have achieved an important milestone in the battle against cancers driven by KRAS mutations, one of the most common and difficult to treat patient populations. MRTX849 has been designed to specifically target KRAS G12C mutations, which are thought to be responsible for at least 14% of non-small cell lung adenocarcinoma, 4% of colorectal cancer, and subsets of other types of cancers. In preclinical studies MRTX849 potently and specifically bound to KRAS G12C and produced durable tumor regressions in patient-derived cancer models implanted in mice. Our Phase 1/2 clinical trial is designed to rapidly advance MRTX849 towards registration and approval.

This was a big moment for these patients as well, considering lack of treatment options and poor prognosis for those cancer harbors this specific mutation.

The same month, the company chose to again access financing, selling 1,854,838 shares of its common stock at a price point of $62 per share for gross proceeds of $115 million. Investment banks involved included JPMorgan Securities, Citigroup Global markets, Cowen, Barclays Capital, and Credit Suisse Securities.

Fast forward to ASCO, where competitor Amgen announced first clinical results from its phase 1 study for AMG 510. No dose-limiting toxicities occurred at tested dose levels with substantial anti-tumor activity observed as a monotherapy. 35 patients were enrolled (144 non-small cell lung cancer or NSCLC, 18 colorectal cancer or CRC and 2 others). These patients were heavily pre-treated with 2 or more prior lines of therapy and enrolled in four dose cohorts (180 mg, 360 mg, 730 mg, and 960 mg). Early signs of activity were promising with 5 of 10 evaluable NSCLC patients experiencing a partial response and four others with stable disease (disease control rate of 90%). Interestingly enough, one patient with PR improved to complete response post data cutoff. As for CRC patients, 13 of 18 evaluable achieved standard disease (keep in mind most were treated with just the first two dose levels). I'll be looking forward to seeing more patients treated at higher doses, durability of effect over time and later on the opportunity to combine the agent with other therapeutic options. As for safety and tolerability, treatment-related adverse events were mainly grade 1 in nature (681%) with two grade 3 treatment-related adverse events reported (anemia and diarrhea).

In its first quarter update, Mirati reminded investors that dosing was ongoing for its own phase 1/2 study of KRAS G12C inhibitor MRX849. The clinical collaboration with Bristol-Myers Squibb (NYSE:BMY) to evaluate the combination of sitravatinib and nivolumab in the phase 3 study in second-line NSCLC patients was also highlighted.

As for future catalysts of note, an initial clinical update on MRTX849 is expected at some point in the second half of 2019. Phase 3 study for sitravatinib should get underway in the near term. Phase 2 proof of concept trials evaluating sitravatinib in a number of indications (with nivolumab in checkpoint refractory bladder, with tislelizumab in NSCLC, RCC, and Ovarian) should yield initial data in the second half of the year as well.

In management's presentation at HC Wainwright in April, we were reminded that KRAS was identified quite some time ago as the most frequently mutated gene in human cancer but simply wasn't actionable with direct inhibitors at that point. KRAS mutations occur early in tumor genesis and do not overlap with other tumor drivers. The way has already been paved here in some respects, given that mutant KRAS has been part of approved assays for many years. These patients are already tested and identified, so enrolling studies is much easier in that respect. MRTX849 has been tested in over 25 in vivo models with clear dose response observed and in certain models higher doses showed durable complete responses (even after dosing was stopped tumors continued to stay in complete response). Management's strategy of pursuing a single agent accelerated pathway based on response rate seems to be the most logical and efficient in terms of generating the data package needed and creating substantial value for shareholders.

Figure 3: Promising in vivo activity for MRTX849 (Source: corporate presentation)

Finances continue to be in good shape, with cash and equivalents of $301 million reported in Q1 versus net loss of $40.9 million. Research and development expenses rose significantly to $34.2 million, while G&A came in at $9.8 million.

Figure 4: KRAS G12C market opportunity (Source: corporate presentation)

Considering the size of the market opportunity being targeted (in spite of competition in the horizon), the stock could have more room to run before the initial data readout.

As for institutional investors of note, sizeable stakes are held by Baker Brothers, Boxer Capital, EcoR1 Capital, Cormorant Asset Management, and Perceptive Advisors.

Final Thoughts

To conclude, this one has run much farther and faster than I could have imagined given that we still haven't gotten initial data for MRTX849. That said, management has a clear plan in place for progressing the asset forward to take advantage of the lucrative opportunity in KRAS G12C mutations. While this is great news for investors who rode the run-up, risk continues to increase as valuation and stock price roar higher. There's also substantial competition in the space from Amgen and other up and comers (great news for these patients who currently are in need of novel therapeutic options).

For readers who are interested in the story and have done their due diligence, I can see the rationale for patiently accumulating a partial position on any pullbacks in the stock given the opportunity in KRAS and promising preclinical data. However, consider that a position here continues to be highly speculative until initial data is unveiled and proof of concept is achieved.

Risks include disappointing results in the clinic for both sitravatinib and MRTX849, as well as additional dilution in the future (perhaps even 2H 2019 as the golden rule of biotech is to raise while you can, not when you need to). Substantial competition in the KRAS G12C space should be considered as well (Amgen, Gilead (NASDAQ:GILD), Moderna (NASDAQ:MRNA), Novartis (NYSE:NVS), BridgeBio (BBIO), and others).

For our purposes in ROTY, although I am a big fan of the targeted oncology space and we hold another name here, at this point, Mirati Therapeutics is too speculative for me until I see proof of concept data.

I greatly appreciate you taking the time to read my work and hope you found it useful. Consider clicking "Follow" next to my name to receive future updates and look forward to your thoughts in the Comments section below.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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