Wealth is the slave of a wise man. The master of a fool "― Seneca
In this week's "deep dive," we take a look at an interesting small developmental company in the oncology space that we have never taken a look at before. Like most in the pre-clinical space, the shares have been hit hard and are down substantially from all-time highs. A full analysis follows below.
Cue Biopharma, Inc. (NASDAQ:CUE) is a Cambridge, Massachusetts-based clinical-stage drug concern focused on the development of injectable biologics that target and modulate specific T cells with an initial focus on fighting cancer. The company has one early-stage clinical candidate undergoing evaluation for the treatment of human papilloma virus positive (HPV+) head and neck squamous cell carcinoma (HNSCC) as well as a host of pre-clinical assets. Cue was formed as Imagen Biopharma in 2014 and went public under its current moniker in 2017, raising net proceeds of $61.9 million at $7.50 a share. The stock currently trades around $4.25 a share, equating to a market cap of $140 million.
The immune system is comprised of the gut biome and several white blood cell subtypes that activate innate and adaptive responses to pathogens, including viruses, bad bacteria, and mutated proteins. When leukocytes such as dendrite cells, macrophages, and/or B cells come into contact with a pathogen, they uptake their antigens, break them down into peptides and display them on their cell surfaces. Known as antigen presenting cells (APCs), they trigger the generation of major histocompatibility complex peptides (pMHCs), which are recognized by the body's T cells, or more accurately, their receptors (TCRs). The TCR-pMHC interaction (signal 1) as well as the presence of other co-stimulatory signals such as cytokines (signal 2) dictate specific T cell activation and regulation. Once called into action, the selected T cells go to work damaging or destroying the pathogen.
Cue's Immuno-STAT (Selective Targeting and Alteration of T Cells) platform combines both signal 1 and signal 2 into one molecular compound, which is designed to mimic the body's natural antigen-specific T cell immune response. This differs from current approaches, which typically involve extracting T cells from a patient, expanding and activating them outside the body, and subsequently reintroducing them into the patient. While legacy CAR-T approaches have demonstrated promise, they are also riddled with risks from systemic administration, including cytokine release syndrome and autoimmune disease. Cue aims to circumvent this issue through the creation of compounds that elicit specific responses.
Much of the technology for this platform was obtained through a royalty-bearing licensing agreement with Albert Einstein College of Medicine.
Immuno-STAT has spawned one early clinical-stage oncology candidate as well as several infectious disease, autoimmune disease, and other cancer-targeting preclinical compounds.
Its lead program is CUE-101, a fusion protein biologic that contains an interleukin-2 (IL-2) variant and a pMHC derived from the HPV-16 E7 protein, which plays a significant role in tumor growth. CUE-101 is undergoing evaluation as a single agent, as part of a combination therapy, and as a neoadjuvant therapeutic for the treatment of HPV+ HNSCC in three Phase 1 trials.
The monotherapy trial, which began in 2019, is being conducted on HPV+ recurrent/metastatic (R/M) HNSCC patients in a second line or later setting. Across seven different dosages, no maximum tolerated dose was identified, buttressing management's belief that its biologics, owing to their design, engage selectively. Of the 14 patients treated at the recommended Phase 2 dosage (4mg/kg), one achieved a partial response lasting more than 36 weeks with six patients achieving stable disease, lasting 12 or more weeks. Based on preliminary data, management estimates median overall survival of 47 patients at approximately eight months. With these results, Cue plans to huddle with the FDA in 2H22 to present a registrational pathway for CUE-101 as a monotherapy in a third-line setting for patients who have failed chemotherapy and anti-PD1 regimens.
In 4Q20, Cue initiated a dose escalation Phase 1 trial assessing CUE-101 in combination with Merck's (MRK) KETRUDA-treating HPV+ R/M HNSCC in a first line setting. To date, two dose cohorts have been completed and a third initiated, with two partial responses reported in the four patients covering the second and third dose cohorts. A more formal initial readout is expected by YE22.
Although the approach is novel, the market hasn't been terribly impressed by the recent data trickles from these two trials, and has grown impatient with the development of the CUE-101 program (e.g., the long wait to meet with the FDA). As such, shares of CUE have fallen from a 52-week high of $18.42 in November 2021 to $5.31. Furthermore, the recent failure of Nektar Therapeutics' (NKTR) long-acting systemic, non-specific IL-2 candidate, bempegaldesleukin, in a Phase 3 combo trial with Bristol Myers Squibb's (BMY) Opdivo for the treatment of unresectable or metastatic melanoma, has added an additional layer of uncertainty regarding the IL-2 approach. However, it may also present an opportunity, demonstrating the fallibility of a systemic, non-specific therapies. CUE-101 is the only compound in the clinic that specifically targets HPV+ cancers.
It is also being assessed in an investigator sponsored Phase 1b neoadjuvant study for locally advanced HPV+ HNSCC in conjunction with Washington University in St. Louis.
If successful, there are 24,600 new cases of HPV+ cancers every year - including head and neck, cervical, and genitoanal - leading to 9.000 deaths, representing a considerable unmet need. To that end, Cue plans to pursue these other HPV+ indications with CUE-101. As far as other oncology indications, the company expects to soon file an IND for CUE-102, which targets WT1, an oncofetal antigen known to be over-expressed in more than 20 different cancers.
Both CUE-101 and CUE-102 are part of a collaboration agreement that Cue entered into with LG Chemical Co. (OTCPK:LGCLF), under which the latter will develop both compounds for commercialization in Australasia. Cue received $5 million upfront and is eligible to receive milestones up to $400 million and single-digit royalties.
Cue believes its platform can design therapeutics to treat other maladies, including infectious and autoimmune diseases. Under budgetary constraints, the company is actively seeking third-party collaborators for these indications. To that end, it has partnered with Merck (and has granted it certain licenses and rights) to develop biologics that target certain autoimmune indications. In exchange, Cue received $2.5 million upfront to advance the discovery of such compounds and is eligible to garner milestone payments up to $371 million as well as tiered royalties.
To fund its CUE-101 and CUE-102 programs, the company held cash of $64.4 million as of December 31, 2021, and subsequently drew $10 million from a loan agreement with Silicon Valley Bank in February 2022. Cue also has an active ATM facility, from which it withdrew just under $24 million in the first quarter. These funding sources provide it with a cash runway for at least another 12 months.
With its somewhat unique approach to immuno-oncology, it isn't surprising to see Street analysts bullish on Cue's prospects, featuring one outperform and five buy ratings - amongst those offering commentary over the past year - with a median twelve-month price target of $23. It should be noted that three firms lowered their price objectives after the company's 4Q21 update in March 2022, citing sector revaluation and extended CUE-101 timelines.
With the weakness in its stock price, director Aaron Fletcher, representing the interests of Bios Special Opportunity Fund, purchased 735,000 shares at $4.76 on March 31, 2022, prompting a short-lived rally above $6.
With Cue, the early trial data demonstrate some promise to its approach, but it is still too amorphous to determine efficacy and improved safety profiles until more arrives. It also doesn't help that the company has yet to complete a Phase 1 study since commencing operations in 2014. And, given that it does not plan on meeting with the FDA to discuss a CUE-101 monotherapy registrational pathway until 2H22, the chance of a pivotal trial commencing before mid-2023 seems remote.
In the meantime, Cue will continue to burn cash. Until the company can demonstrate better efficacy in the clinic, it is a "show me" stock, Street analyst recommendations and insider buying notwithstanding. If good news does arrive, expect a subsequent announcement of a secondary offering, at which point shares of CUE may become attractive. In the meantime, we will keep an eye on its progress.
Despite a voluminous and often fervent literature on "income distribution," the cold fact is that most income is not distributed: It is earned."― Thomas Sowell
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