Our Take On Olema Pharmaceuticals

Summary

• Shares of Olema Pharmaceuticals fell 60% after initial data on its estrogen receptor antagonist (OP-1250) failed to impress in a Phase 1a dose escalation study for breast cancer.
• There is still a slither of hope as the doses chosen for the Phase 1b portion performed slightly better than competitors’ candidates, albeit from a small sample size (n=12).
• With over $300 million in cash and some recent insider buying, this busted IPO merited further investigation.
• A full investment analysis follows in the paragraphs below.
• Looking for a portfolio of ideas like this one? Members of The Busted IPO Forum get exclusive access to our model portfolio. Learn More »

Povozniuk/iStock via Getty Images

War is evil, but it is often the lesser evil.” – George Orwell

Today, we put a small biopharma concern that is already deep in 'Busted IPO' in the spotlight for the first time. A full analysis follows below.

Company Overview

Olema Pharmaceuticals, Inc. (NASDAQ:OLMA) is a San Francisco based early clinical-stage biopharma concern focused on the development of therapies in women’s oncology with an initial concentration on breast cancer. The company has one asset (OP-1250) in the clinic that is being evaluated as a monotherapy for the treatment of estrogen receptor-positive, HER2-negative metastatic breast cancer (ER+, HER2- MBC). Olema was formed as CombiThera in 2006, changed to its current moniker in 2009, and went public in 2020, raising net proceeds of $220.6 million at $19 per share with an opening trade at $45. Its stock currently trades around $8.50 a share, translating to a market cap of $375 million.

The company has spent the past decade characterizing the structure and function of the ER, which is a causal factor in ~73% of breast malignancies, accounting for nearly 30% of newly diagnosed cancers in women. The ER has been targeted by therapies since the 1970s, with the introduction of ER modulator tamoxifen and later (1990s) by fat tissue enzyme (aromatase) inhibitors [AIS], which prevent estrogen synthesis. However, both these therapies are plagued by patient resistance and – in the case of AIs – side effects such as arthralgia (joint pain). Endocrine agent fulvestrant – currently marketed as Faslodex by AstraZeneca (AZN) – was approved in 2002 and is both a complete ER antagonist (CERAN) – meaning it turns off transcription factor AF2 and recruits the protein N-CoR to inactivate AF1 – and a selective ER degrader (SERD); however, it is menaced by suboptimal drug exposure, requires a difficult once-monthly administration in the buttocks, and only inhibits tumor proliferation.

Pipeline

To address the drawbacks of fulvestrant, Olema developed orally available OP-1250, which has the former’s CERAN/SERD dual mechanism of action while demonstrating higher drug concentrations at the tumor site. OP-1250 has also exhibited the ability to shrink ER+ tumors in murine models, demonstrating superiority to tamoxifen and fulvestrant.

Source: Company Website

Owing to these preclinical outcomes, the company plans to evaluate its candidate as both a monotherapy and in combination with other approved treatments against multiple female cancers. OP-1250’s initial target is ER+, HER2- MBC, for which it initiated a Phase 1/2 trail in August 2020.

Source: Company Website

In the Phase 1a dose escalation portion of the study, 41 patients with at least one prior line of therapy (i.e., chemo, AI, fulvestrant, and/or CDK 4/6 inhibitor), were administered dosages ranging from 30 mg to 300 mg. To date, it has been determined that OP-1250’s half life is between 51 and 73 hours, which is supportive of once-daily dosing. Of the evaluable patients in the likely Phase 2 dosage range of 60 mg to 120 mg (as of November 1, 2021), the objective response rate (ORR: complete response or partial response) was 17% (2/12) with a clinical benefit rate (ORR + stable disease > 24 weeks) of 46% (6/13). For all dosages, OP-1250’s ORR was 8% (2/24) with Street expectations around 15%. OP-1250 was well tolerated with most adverse events at the grade 1 or 2 level. Although portrayed as promising relative to other recent Phase 1 SERD candidates in a second line or later setting, the data greatly underwhelmed the market when it was released on November 30, 2021, resulting in a 60% downdraft of Olema’s share price in the subsequent trading session ($21.89 to $8.75).

Management expects to complete Phase 1a dose escalation and initiate Phase 1b dose expansion (60 mg and 120 mg; n=15 each) soon. It then plans to select a dose and initiate three Phase 2 cohorts across 80 patients in 1Q22. The cohorts will include measurable disease (n=50); non-measurable disease (n=15); and central nervous system metastasis (n=15). The company also expects to initiate a Phase 1b study assessing OP-1250 in combination with CDK 4/6 inhibitors in 1Q22.

ER+ Breast Cancer Market

If successful, the opportunity for OP-1250 is substantial with nearly two million new cases of breast cancer diagnosed each year worldwide (~282,000 in the U.S.), of which ~65% are ER+, HER-. Approximately 20%-30% who are diagnosed with early-stage breast cancer will progress to metastatic disease (stage IV). The market for ER+ breast cancer endocrine therapies is anticipated to be ~$10 billion across the U.S., Europe, and Asia in 2021. And with ~43,600 American women expected to die from metastatic breast cancer this year, there is clearly an unmet need.

Source: Company Website

To be sure, there are at least eight other competing orally available ER+ candidates in the clinic and none of them have necessarily distinguished themselves – at least in a Phase 1 study. Roche’s (OTCQX:RHHBY) SERD candidate RG6171 (giredestrant) returned an 11% ORR in a Phase 1 study of ER+, HER2- MBC patients with a median of one prior treatment. AstraZeneca’s AZD9833 (camizestrant) is undergoing Phase 3 assessment for ER+ HER2- MBC. Its ORR in a Phase 1 study was 10% with patients receiving a median of three prior lines of therapy. Sanofi’s (SNY) SAR439859 (amcenestrant) ‘achieved’ 7% ORR with a median of two prior treatments. G1 Therapeutics’ (GTHX) G1T48 (rintodestrant) had a 5% ORR with three prior lines. Eli Lilly’s (LLY) LY3484356 also posted an ORR of 5% in a Phase 1 trial with a median of two prior lines.

Some of the above listed oral SERD agents are CERANs, like OP-1250, but others have partial agonist activity despite being SERDs and thus are not CERANs. SERDs reduce ER levels, but they do not entirely eliminate them. Mechanisms of action aside, ORRs and progression free survival [PFS] are the statistics that matter in these trials.

Also of note, in October 2021, Radius Health’s (RDUS) injectable SERD elacestrant achieved its primary endpoints – progression free survival [PFS] and PFS in patients with tumor harboring ER 1 mutations – in a Phase 3 trial treating ER+, HER- MBC. When released, this news gave shares of OLMA a shot in the arm as it provided further credence that the SERD route was worth pursuing for this indication and that a best-in-class oral version would rise above the competition. As such, Olema is still hopeful that data from the 60mg and 120mg doses from the upcoming Phase 1b study will lift its prospects.

Balance Sheet & Analyst Commentary

Owing to the collapse in Olema’s stock price, its market cap is closing in on its balance sheet cash and marketable securities, which stood at $306 million as of September 30, 2021. The company has not burned through much – only ~$11 million per quarter in 2021 – but that pace should accelerate significantly as OP-1250 enters the clinic for multiple indications. It should have a runway through at least 2023.

Despite the recent fall in share price, Street analysts are still very constructive on Olema with two buy and three outperform ratings. Both Jefferies ($18 price target) and JPMorgan ($47 price target) essentially said that the data was fundamentally sound and that the selloff was unwarranted, albeit seems to have taken its price target down from $55 previously.

Also in that camp is insider Biotechnology Value Fund, represented on Olema’s board by Gorjan Hrustanovic, who used the massive selloff on November 30th, 2021 to purchase nearly 740,000 shares, propelling its ownership interest to 7.4 million shares, or 18.4% of the company.

Verdict

Olema’s downdraft is even more significant when considering its shares briefly traded over $60 approximately one year prior, meaning they are now down 83% since. The data from the two Phase 1b dosage cohorts for the ER+, HER2- MBC will dictate Olema’s direction over the next year. If the ORRs are 15% or higher, OP-1250 has a chance to achieve best in class amongst a sea of mediocrity in the oral SERD space. After that, the next needle-moving catalyst for the company will be its Phase 2 data for the same indication. With dose selection for that trial not expected until 1Q22, data from it are not likely forthcoming for at least 12 to 18 months thereafter. Despite the insider defending its position, Olema is in the category of “show-me” stock. We have no investment recommendation on this name at this time but may revisit it if/when its pipeline is in later stage development.

For those more aligned with analyst enthusiasm, the company's large cash balance and insider buying; there are options against this equity so taking a 'watch item' holding via covered call orders is one viable approach.

War is a series of catastrophes which result in victory.” – Albert Pike

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

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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.

Comments

[gutcheck]

any bottom

[Peter Allan Childs]

Price. New lows any hope ???? @. @

[Nodelusionist1]

Trying to picture what a " slither" of hope would look like!
Like a snake escaping into it's den?
LOL
(Just a gentle way to suggest a correction, Brett.)

[Igraduatedcollegealready!]

@Nodelusionist1 You didn’t understand his comments. Had he put sliver, would you have understood?