Our Take On CytomX Therapeutics

About: CytomX Therapeutics, Inc. (CTMX)
by: Busted IPO Forum

Today, we take an in-depth look at a small developmental concern called CytomX Therapeutics.

Despite receiving over $400 million in upfront/milestone payments with two wholly owned assets in the clinic, the market is assigning a value of less than $200 million to its franchise.

With multiple shots on goal and some insider buying earlier in the year, CytomX merited a deeper dive.

Today, we look at small oncology platform concern with several strategic partnerships that came public almost four years and whose stock trades just under its debut level despite the shares having a wild ride over that time frame.

Company Overview

CytomX Therapeutics, Inc. (CTMX) is a South San Francisco-based, clinical-stage biopharmaceutical concern focused on the development of its Probody therapeutics for the treatment of cancer. The company was founded in 2008 and went public in 2015, raising net proceeds of $81.8 million at $12 per share. CytomX currently has two wholly owned candidates in the clinic and collaborative efforts with four major pharmaceutical outfits. It employs ~140 people and commands a market cap slightly over $460 million.

Probody Platform

The company’s proprietary antibody localization Probody platform produces therapeutics with three components: an anti-cancer antibody, a mask for the antibody, and a protease-cleavable linker which connects the mask to the antibody. The mask is a peptide designed to disguise the active binding site of the antibody to prevent it from binding to the target present on healthy tissue. Upon entrance into the protease-rich tumor microenvironment, the proteases cleave to the therapeutics’ linkers, effectively removing the masks and allowing the antibodies to bind to the targets on the tumor. CytomX is betting that this design will effectively treat the tumor without generating toxicities in healthy tissue, an unwanted byproduct of current antibody therapies. The scientists at the company believe this platform has utility in immunotherapies, antibody drug conjugates, T-cell engaging bispecifics, and CAR T and NK cell therapies. To date, the CytomX Probody platform has spawned several early-stage candidates.

Source: Company Presentation


CX-072. CytomX’s most advanced candidate is CX-072, an antibody targeting programmed cell death ligand 1 (PD-L1) that is being evaluated in multiple oncology indications in a Phase 1/2 study (PROCLAIM-CX-072). PD-1 and PD-L1 work together to negatively regulate immune response in healthy tissue. Tumors, however, upregulate PD-L1 to evade immune surveillance. This demonstrated connection has initiated the development of PD-1 and PD-L1 antibodies, with six currently approved in the fight against cancer. However, their long litany of side-effects and partial efficacy demonstrates the need for further improvement.

Source: Company Presentation

CX-072 is being studied as both a monotherapy and in combination in the four-part PROCLAIM-CX-072 trial that initiated January 2017. The safety, tolerability, and preliminary antitumor activity of CX-072 is being evaluated as a monotherapy in heavily pretreated cancer patients in a dose optimization study (Part A), the results of which have selected a dosage for dose expansion Part D. It is also being evaluated in combination with Bristol-Myers’ (BMY) anti-CTLA-4 agent Yervoy (ipilimumab) (Part B) and Roche’s (OTCQX:RHHBY) BRAF enzyme inhibitor Zelboraf (vemurafenib) (Part C) in patients with advanced, unresectable solid tumors or lymphoma.

Source: Company Presentation

To date, two interim updates have been presented. In the August 2018 readout, it was discovered that of the 18 patients who received CX-072 monotherapy doses > 3mg/kg, objective responses were observed in 3 of 18 patients, disease control rate was 61%, and decreased target lesions were observed in 10 of 17 patients (59%).

In February 2019, CytomX presented data on 24 efficacy evaluable patients treated with doses > 3mg/kg, where four objective responses were observed (17%) and tumor shrinkage or arrest was observed in 12 patients (50%). CytomX chose the 10mg/kg dose for its Part D monotherapy cohort expansion studies - where it is being evaluated in eight different cancer indications - because at that dosage, more than 98% of PD-L1 receptor in the tumor is occupied by CX-072.

Some preliminary data from Part D was also read out in February 2019 from four of the eight indications (34 patients), and that demonstrated efficacy in line with other PD inhibitors.

Just as important, to date, of the 72 patients evaluable for safety in five cancer indications, 35 patients (49%) experienced Grade 3/4 treatment-emergent adverse events, with four (6%) being treatment-related. One death resulted but was not related to CX-072. Two patients discontinued the study, of which zero were related to CX-072. These safety results compared favorably with currently approved PD-pathway inhibitors.

In the dose evaluation phase of Part B, of the 19 efficacy evaluable patients who received CX-072 and Yervoy, four experienced confirmed objective responses, including one complete response. A dosage of 10/mg/kg CX-072 + 3 mg/kg ipilimumab has been selected for the cohort expansion phase, which will be initiated sometime in 2019. Of the 27 safety evaluable patients treated with that combination, seven (26%) experienced Grade 3/4 AEs, comparing favorably to historical norms, which are typically north of 50%.

Preliminary Part C data (CX-072 + Zelboraf) will likely readout just before or shortly after YE19.

CX-2009. The company’s other wholly owned asset is CX-2009, a Probody drug conjugate (PDC) that is a modified antibody drug conjugate (ADC), or antibodies conjugated to a small molecule cytotoxic agent via a chemical linker. ADCs have been approved for oncology indications, including Roche’s Kadcyla for HER2+ metastatic breast cancer. CX-2009 is unique, as it targets CD166, which is highly expressed in many cancers, including breast, lung, ovarian, head and neck, but is also highly expressed in healthy tissue. With CytomX’s masking technology, it is expected that CX-2009 and its cytotoxic conjugated SPDB-DM4 payload will only enter tumor cells to attack CD166.

Source: Company Presentation

Interim data of the dose portion of a Phase 1/2 trial (PROCLAIM-CX-2009) in heavily pretreated patients also readout in late February with the CX-072 data. It revealed that CX-2009 achieved tumor shrinkage in 15 of 39 patients (38%) and stable disease or better at the time of the first on-treatment scan in 29 patients (74%). One concern: ocular toxicity was high - specifically, cornea inflammation (keratitis) - which is a well-established side effect of the DM4 payload. Dose refinement is ongoing, with the addition of mandatory prophylactic measures to manage ocular toxicity. CytomX is hopeful that dose expansion will occur before YE19.

As part of CX-2009’s development, the company licensed ImmunoGen’s (IMGN) ADC technology, which obligates CytomX to pay up to $160 million of milestones and mid- to high-single digit royalties to Immunogen if CX-2009 achieves commercial status.

The market did not react well to the February 26, 2019 readouts, as CytomX sold off more than 30% that day and has since lingered in busted IPO (sub-$12) territory ever since.

Collaborative Efforts

In addition to its wholly owned candidates, CytomX has four ongoing collaborations utilizing its Probody platform.

BMS-986249 with Bristol Myers. The most advanced alliance is with Bristol Myers, which has entered a candidate into the clinic using CytomX’s technology. BMS-986249 is a CTLA-4 Probody immunotherapy, which is essentially FDA-approved but currently black box-labeled Yervoy employing the Probody platform. It is being evaluated in a Phase 1/2 trial with an endgame of leveraging Probody to create a safer version of Yervoy.

BMS-986249 is part of a multi-target collaboration that has earned CytomX $287 million to date with $4 billion in potential milestones and tiered royalties up to the low-double digits. With that said, Bristol terminated three of its initial four oncology targets in January 2019, leaving BMS-986249. Bristol still has options on an additional six oncology and two non-oncology targets.

CX-2029 with AbbVie (ABBV). CytomX’s other clinical collaborative effort is its anti-CD71 PDC (CX-2029) with AbbVie. CX-2029 targets the CD71 protein, essential for iron uptake in dividing cells that is highly expressed in a number of solid and hematologic cancers but also in healthy tissue. CX-2029 is currently being studied in a Phase 1/2 trial that is currently ongoing.

As part of its co-development agreement, CytomX is responsible for CD-2029’s early stage progress and AbbVie is in charge of the late-stage development and commercialization with CytomX footing 35% of the late-stage clinical bill. In return, CytomX has been paid $20 million upfront and $35 million in milestones and is eligible to receive additional milestones of $435 million, a 35% profit split in the U.S., and high-teens to low-20% royalties ex-U.S.

The two concerns also have a discovery agreement whereby AbbVie has development and commercial rights on two targets, one of which was selected in March 2017 and the other very recently (July 9, 2019), triggering $10 million milestone payments in each instance. CytomX is eligible to receive milestones up to $275 million for each target, as well as high-single digit to low-teens royalties.

Amgen. CytomX is also in a collaborative effort with Amgen (AMGN) to leverage its platform to co-develop an Epidermal Growth Factor Receptor-CD3 engaging Probody T-cell bispecific. As part of its 2017 agreement, CytomX received $40 million upfront and a $20 million equity investment from Amgen. The company is also eligible to receive milestones of $455 million, a sub-50% profit share on U.S. sales, and low-double digit to mid-teen royalties ex-U.S. Additionally, Amgen has the option to select up to three other targets, which could gross CytomX $950 million plus high-single digit to low-teen royalties.

ImmunoGen. The company's fourth licensing agreement is a two-way deal with ImmunoGen, with the CX-2009 piece detailed above. On the other side of the collaboration, ImmunoGen has the right to create two PDCs directed at two targets. Of the two targets, ImmunoGen has terminated one program and is continuing onward with an epithelial cell adhesion molecule that is still in the preclinic. If commercially viable, CytomX could receive up to $80 million in milestones and mid-single digit royalties.

It should also be noted that CytomX had a four-target collaboration with Pfizer (PFE) dating back to 2013 that terminated in March 2018.

Balance Sheet and Analyst Commentary

With over $400 million received from collaborations to date, CytomX has only returned to the capital markets once since its 2015 IPO, raising net proceeds of $134.6 million at $24.50 in July 2018. As of the end of the second quarter, it held cash and equivalents of just under $350 million and no debt. If no additional milestones are achieved, CytomX has enough cash to fund its operations well into 2021.

The current median analyst price target on CTMX is just north of $20.00 a share. Since posting Q2 results on August 7th, four analyst firms, including Cowen & Co. and Nomura, have reiterated Buy ratings on the stock. Price targets proffered have ranged from $16 to $23 a share. H.C. Wainwright, which has the $23 price target on CTMX, provided this brief blurb on its valuation methodology last week.

We utilize a 70% probability of approval for we apply a 10% discount rate and 29% effective tax rate, yielding a total value of $829M. This translates into a price per share of $23, assuming 47.4M shares outstanding and roughly $248M in cash and equivalents as of mid-2020"

The company’s chief legal counsel purchased 9,000 shares in March 2019, marking the first insider buy since 2015.


Factoring another quarter of cash burn and the $10 million from AbbVie, CytomX holds ~$8 a share in cash, meaning that the market values its pipeline and Probody platform at just over $100 million. Although the CX-072 mono data is not earth-shattering, its safety profile in combination with Yervoy adds validity to the Probody platform. And the early data on CX-2009 is encouraging. The $400+ million shelled out by four major drug companies - really five - to date for its Probody technology suggests that CytomX’s multiple shots on goal might be underappreciated and undervalued.

I was really hoping to like this name given it has so many traits I like to see before recommending a developmental concern for investment. However, even with the positives outlined above, I have several reservations, in no particular order.

1. Pfizer has already bailed on CTMX, and I get the sense that BMY (now that it is dealing with Celgene (CELG)) will bail if results from its Phase 1/2 trial fall short. ImmunoGen has already abandoned one target, and the other hasn't gotten out of the preclinic yet. Amgen's target isn't in the clinic. Only AbbVie seems committed, although I'm not confident that the CX-2029 Phase 1/2 trial will yield anything stellar anytime soon.

2. It's not that the platform isn't novel, it's just that it seems to be targeting functions that occur in healthy tissue, which means it is not attacking the triggering mechanism (root cause) to cells going rouge and becoming cancerous, but rather, completion functions post going rouge. Not that this method can't work, but it just doesn't seem like the right approach.

3. The data in the CX-072 trial is small, tepid, and confusing. It appears as if there is little focus: let's just have a trial and throw a lot of stuff at the wall, and even though none of it appears to be sticking, we can fall back on: a) heavily pretreated patients on death's doorstep; and b) the fact that it's just dose escalation. I know that's the nature of early-stage studies, but there just isn't anything to hang one's hat on here.

4. CX-2009 looks marginally encouraging based on the preliminary data, but the ocular toxicity could be an issue. Steroidal drops is management's explanation. We'll see if that proves to be the case.

5. The one insider buy is against dozens and dozens of insider sells since 2015.

Given these concerns, I am passing on making any Buy recommendation on this name at the moment. For those that are comfortable taking a flyer with a "watch item" position given the company does have positive attributes, I offer up this as a comprehensive starting point for your own due diligence.

It is forbidden to kill; therefore all murderers are punished unless they kill in large numbers and to the sound of trumpets.”

- Voltaire

Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum.

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.