Aprea Therapeutics Cancer Therapy Platform Is Promising

Summary

• Aprea IPO'd in October 2019.
• Its therapies for cancer work on the p53 protein, Guardian of the Genome.
• Results are promising so far, and stock price is reasonable.

Aprea Therapeutics (NASDAQ:APRE) is a clinical stage biotechnology company with a promising cancer drug that is in a Phase 3 study that should report out preliminary data late in 2020. If the drug, eprenetapopt, shows positive results, it could get approved by regulatory agencies and, with further trials, get its label expanded to other cancers. Aprea's stock has only been available for public purchase since its IPO in October 2019.

Because I had bought a considerable (for me) amount of Inovio (INO) for as low as $2.43 in 2019, and it went up as high as $33.79 this year, I have been rebalancing my portfolio (I don't like any one stock to be over 10% of the portfolio). I have accumulated some cash in case the pandemic crashes the market, bought more of some of the other stocks in my portfolio, bought some non-biotech dividend stocks, and added two biotechs to my portfolio, Aprea and Arrowhead (ARWR). This article is my first on Aprea. I will explain why I bought it. Which is, of course, that I think that while there are risks, it has a good chance of becoming a much larger pharmaceutical company in this decade. Or it may be bought out by one of the larger companies looking for a way to quickly add to their commercial-stage cancer drug portfolio.

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Eprenetapopt

Cancer has complex causes, commonly including many possible mutations in the chromosomes of a cell that allow it to start growing in an unregulated fashion. The body has many mechanisms to eliminate cancer cells, some of them external to the cell, some of them internal. P53 is a protein, sometimes called the Guardian of the Genome, that acts as a tumor suppressor. In its healthy, or wild, form, it prevents mutations. It also can kill the cell (apoptosis) if it is unable to repair damage to DNA. When the p53 gene, TP53, is itself mutated, it can stop acting as a suppressor, allowing multiple mutations to push a cell into cancer mode. It is also thought to play an important role in preventing aging.

P53 is the most commonly mutated protein in human cancers, occurring in an estimated 50% of them. Because it codes for a complicated protein, the gene TP53 may have many mutant variants. Because of that targeting, any one mutant would not be very helpful. Eprenetapopt binds to p53 in the DNA-binding domain, stabilizing mutant p53 into the normal, functional structure. This reactivated p53 can stop cell divisions or lead to apoptosis, its normal functions.

Nice theory, but does it work? So far the results are positive in clinical trials. The most advanced trial underway is for MDS (myelodysplastic syndromes) with mutant p53, in combination with azacitidine. It has been awarded Breakthrough Therapy designation by the FDA. In the Phase 2 trial results, eprenetapopt had an ORR (overall response rate) of 75%, and a remarkable 57% of patients had CR (complete remission). In addition, in responding patients who received three cycles of treatment, 51% tested mutant TP53 negative. Note that this was not a large trial, with 28 evaluable MDS patients.

The Phase 3, frontline MDS trial of eprenetapopt combined with azacitidine should be near completion of enrollment. Aprea hopes to have top line data before the end of 2020. There are over 140 patients enrolled. The primary endpoint is CR rate.

Additional trials of eprenetapopt are underway, as shown:

Source: Aprea pipeline page

In addition, a next generation p53 reactivator, APR-548, is preparing to enter the clinic when it gets the go ahead from the FDA.

Q1 2020 Results and Cash Balance

At the end of Q1 2020, Aprea had a cash and equivalents balance of $122.5 million, which should be more than adequate to get it through the key Phase 3 readout. Cash burn for all of 2020 is expected to be no more than $40 million, so it should also be able to get through the period of waiting for an FDA approval. I would guess it will need to raise more cash to commercialize the drug, unless it works with a partner. For a drug development company, expenses were quite low in Q1, just $9.1 million for R&D and $2.8 million for G&A expense. The net loss was $9.4 million or $0.45 per share.

Valuation and Conclusion

On Monday, July 20, APRE closed at $28.41, giving it a market capitalization of about $590 million. That would seem to price in a degree of hope for a positive outcome for the Phase 3 trial. If the Phase 3 trial is successful, we could see revenue sometime in late 2021. We could also see some stock dilution if Aprea raises cash in order to fund a commercial sales force. For investors with a long-term perspective, the important thing to think about is label expansion. Success with MDS means a higher probability of success with AML (acute myeloid leukemia). And keep in mind that about 50% of cancers, those with p53 mutations may get some benefit from eprenetapopt.

If eprenetapopt eventually becomes a standard of care for cancers with p53 mutations, Aprea will become a multi-billion dollar market capitalization company. The main risk I see is that the Phase 2 trial results were for only 28 patients. With a large trial, the statistics could vary significantly, and possibly in the wrong direction. Harmful side-effects can emerge in larger trials that were missed in smaller ones. That is why the FDA usually requires larger, Phase 3 trials before a drug can be approved. Since I mentioned my success with Inovio above, I should also point out I have had several companies fail Phase 3 trials, most recently with Celsion (CLSN).

There is risk, but I see it as small relative to the potential rewards. Shorter term, there is the usual risk from ordinary volatility. Long term, provided Aprea gets positive Phase 3 results, this should be a winner.

Disclosure: I am/we are long APRE, INO, CLSN, ARWR. 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.