Corvus Pharmaceuticals: Insider Buying Ahead Of Potential Turnaround In Second Half Of 2019

Summary

  • Shares have lost over a third of their value since my initial article.
  • I provide a recap of the bullish thesis and CEO Richard Miller's presentation at Jefferies Healthcare Conference.
  • Insider buying by a couple directors and OrbiMed Advisors is encouraging.
  • Much of management lineup is the same team that helped discover and develop ibrutinib at Pharmacyclics.
  • Company has a solid cash position and several near to medium-term catalysts. I still believe that ITK inhibitor CPI-818 could make waves at ASH or in early 2020 with initial data. I suggest purchase of pilot position and accumulating dips.
  • Looking for a community to discuss ideas with? ROTY features a chat room of like-minded investors sharing investing ideas and strategies. Get started today »

Shares of Corvus Pharmaceuticals (NASDAQ:CRVS) have lost over half their value in the past three years and are in the red by 40% over the past 12 months. The company has lost a third of its market capitalization since I introduced this one in ROTY in August last year, noting they had an ace under their sleeve with a preclinical program that caught my attention.

Recently, the stock has seen some insider buying, including multiple purchases by OrbiMed Advisors and a couple directors. One of the latter, Richard Miller, was co-founder and CEO of Pharmacyclics (led the initial discovery and development efforts for ibrutinib, whose success led to the sale of the company for $21 billion to AbbVie (ABBV)).

Chart

Figure 1: CRVS 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 first chart (daily advanced), we can see the sickening downtrend in 2H 2018 as successive data updated for lead clinical programs failed to excite Wall Street. From there, July's impressive bounce appears to have legs as insider buying foreshadows important catalysts in the second half of the year (especially initial data at ASH for ITK inhibitor CPI-818).

Overview

In my initial article, I touched on the following keys to the bullish thesis:

  • The company was pursuing the adenosine pathway with lead programs, which is known to be immunosuppressive (tumors increase adenosine after being exposed to PD-L1 therapy). Lead program CPI-444 aimed to block adenosine A2A receptors on immune cells, while second candidate CPI-006 targets CD73 and blocks adenosine production. These programs were of less interest to me, but management felt that CPI-444 had shown promise in renal cell cancer patients with very advanced diseases (in combination with anti-PD-L1 antibody Tecentriq).
  • ITK inhibitor CPI-818 appeared to be a highly intriguing asset, referred to by management as the "daughter of ibrutinib". Preclinical data in companion dogs diagnosed with T-cell lymphoma appeared quite promising (including one dog with PTCL achieving complete response after 28 days of daily dosing and another with CTCL achieving partial response within 14 days). As for unmet need, I pointed out that median 5-year survival for PTCL is around 25%, meaning there's much room for improvement and a significant unmet need. Management had stated that the drug could make waves at ASH in 2019 with initial data.
  • Institutional ownership was a significant green flag, with OrbiMed Advisors owning around 20% of the company. Depth in the leadership lineup was encouraging as well, with several members being part of the founding team at Pharmacyclics.

Figure 2: Pipeline (Source: corporate presentation)

Let's take a look at what's changed since to determine if there's a near-term opportunity for readers to take advantage of.

Jefferies Presentation

CEO Richard Miller's presentation in early June was quite insightful, with a few key takeaways I wish to share:

- Miller starts by stating that the company remains the leader in the field (adenosine axis), treated over 300 patients on various clinical trials with various adenosine modulators.

- Miller skips to data recently presented at ASCO for CPI-006 (anti-CD73 antibody), noting that it blocks catalytic activity (conversion of adenosine) and also stimulates immunomodulatory activity on CD73 positive cells. The ongoing phase 1 trial in patients with advanced cancers utilizes a 3 by 3 design, including a single agent arm as well as a combination arm with ciforadenant and a third arm combo with pembrolizumab (not opened yet). 12 patients received monotherapy, 8 received combination, and median prior therapies was 4. There were no dose limiting toxicities observed so far, and maximum tolerated dose not reached yet. Not much effect is observed at lower doses, but at higher doses, we can see signs of improved disease control. Certain case studies were encouraging, including a 72-year-old patient with end stage prostate cancer with decrease in target lesion upon receiving 6 mg/kg of study drug (treatment ongoing through 11 cycles). Slide 18 shows that Corvus' antibody is the only one with effects on immune function.

Figure 3: Competitive landscape for anti-CD73 antibodies/inhibitors (Source: corporate presentation)

- Interestingly enough, a series of 8 genes induced by adenosine (adenosine gene expression signature) were observed in all renal cell cancer patients who responded to treatment with ciforadenant. Having such a marker to predict response should prove very helpful going forward (adenosine in tumor, treatment adenosine antagonist makes sense). Genentech data in over 400 RCC patients identified a myeloid signature associated with lack of response to PD-1 or PD-L1 (has been confirmed by other companies, a negative predictor). Hypothesis means that presence of adenosine could explain why these patients are not responding to PD-1/PD-L1 (sets stage for study using this signature to treat patients with checkpoint inhibitor plus adenosine antagonist). The signature is also present in quite a few other cancers (renal cell cancer 50% positive for this signature, colon cancer seems to be high, gastric cancer, and others). This could be exciting as certain cancers haven't been treatable with immunotherapy approach, so this could offer a way to make inroads.

Figure 4: Adenosine gene expression signature shown to correlate with tumor response in renal cancer (Source: corporate presentation)

- As for ITK inhibitor CPI-818, Miller reiterates that the team responsible for BTK inhibitor ibrutinib is the same one that discovered this asset and is progressing it forward. This drug blocks ITK and is in phase 1 trial for T cell lymphomas (dose escalation, find maximum tolerated dose, PK/PD, then open expansion cohorts).

- As of March 31, the company had $105.8 million with cash burn forecast of $43 million (Miller feels they've been efficient with cash use). Net loss for the quarter fell to $11.6 million, while research and development expenses totaled $9.4 million.

- As for near-term milestones, Miller notes they tend to present at almost every major meeting. More data for lead programs will be interesting, but I remain most interested in data for CPI-818 in T cell lymphoma (uses language later this year or early next year, meaning they might not have it ready for ASH in December).

Figure 5: CPI-818 phase 1/1b clinical trial design (Source: corporate presentation)

Final Thoughts

To conclude, it's becoming increasingly evident that a turnaround could be in the works for this small oncology company. Data for a key asset (CPI-818) will be forthcoming toward the end of this year or early 2020, and pedigree of management team lends more credibility to the story despite previous poor performance for the stock. Insider buying and identification of an important biomarker for lead program that could open up new opportunities for innovative trial design are also encouraging.

For readers who are interested in the story and have done their due diligence, I suggest establishing a pilot position in the near term and patiently accumulating dips.

Risks include disappointing data for CPI-818 and lead programs at upcoming medical meetings, setbacks in the clinic, substantial competition in certain spaces targeted such as renal cancer and disappointing regulatory guidance.

For our purposes in ROTY, I'd prefer to receive more concrete guidance on when exactly we can expect initial data for CPI-818 (and possibly wait for initial efficacy data to get that element of derisking/downside cushion we search for).

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This article was written by

Jonathan Faison profile picture
16.14K Followers
Community of Biotech Investors Focused on Value & Clinical Momentum

Founder of ROTY (Runners of the Year), a 500+ member community of biotech investors & traders. Big believer in quality over quantity, my goal is to add value for ALL readers.





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.

Additional disclosure: Disclaimer: Commentary presented is NOT individualized investment advice. Opinions offered here are NOT personalized recommendations. Readers are expected to do their own due diligence or consult an investment professional if needed prior to making trades. Strategies discussed should not be mistaken for recommendations, and past performance may not be indicative of future results. Although I do my best to present factual research, I do not in any way guarantee the accuracy of the information I post. I reserve the right to make investment decisions on behalf of myself and affiliates regarding any security without notification except where it is required by law. Keep in mind that any opinion or position disclosed on this platform is subject to change at any moment as the thesis evolves. Investing in common stock can result in partial or total loss of capital. In other words, readers are expected to form their own trading plan, do their own research and take responsibility for their own actions. If they are not able or willing to do so, better to buy index funds or find a thoroughly vetted fee-only financial advisor to handle your account.

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