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Checkpoint Inhibitors Are Hot, and CKPT Has Something in the Oven


Checkpoint Therapeutics Inc. ( CKPT) holds a portfolio of targeted anti-cancer and immuno-oncology agents which it is developing for both mono- and combination therapies in solid tumors.  The company currently has six cancer compounds in preclinical and clinical stage development that focus on specific cellular markers and cancer signaling pathways.  

In a previous article, we discussed the company’s third generation EGFR inhibitor, CK-101, including the drug’s significant potential market opportunity as a single-agent therapy for non-small cell lung cancer patients, as well as how it may realize synergies in combination with CK-301, an anti-PD-L1 checkpoint inhibitor antibody also under development by the company.  CK-101, which was just granted orphan status, is expected to begin Phase II by early 2018 and CK-301 is expected to commence a Phase I study later this month.  In this article we will discuss the possibilities for CK-301 and the potential significant value of the program based on comparable transactions in the space.  

Checkpoint inhibitors are a class of drugs that interfere with a cancer tumor’s ability to hide from the immune system.  The body’s adaptive immune system and T-cells in particular contain receptors that seek proteins (antigens) that are foreign to the body.  If the T-cells find one of these antigens, they will attack and kill the cell, removing a potentially dangerous intruder from the body.  Cancer cells are able to use certain checkpoint proteins to mask the antigens and their identity as cancer cells.  When the PD-1 receptor on the T-cell binds to PD-L1 on the cancer cell, the T-cell is inactivated and leaves the cancer cell to continue to grow.  Monoclonal antibodies known as PD-1  (and its ligand PD-L1) checkpoint inhibitors can block this erroneous message exchanged between the tumor cell and the T-cell, eliminate the tumor’s ability to hide and allow the immune system to act.  PD-1 and PD-L1 antibodies bind to their respective receptors and prevent this cloaking signal from engaging.  This allows the T-cell to recognize the cancer cell and kill it.

Checkpoint Therapeutics is developing a checkpoint inhibitor called CK-301 which is a fully human antagonistic antibody designed to bind to PD-L1 on the tumor cell and block its interaction with PD-1 on the T-cell.  It is a high affinity PD-L1 specific, fully human IgG1 antibody which blocks binding of PD-L1 to PD-1 and B7.1 and is able to reverse PD-L1 mediated inhibition of T-cell functions.  The company licensed global rights to CK-301 along with several other compounds from Dana Farber Cancer Institute in March 2015.  Preclinical studies for CK-301 are complete and the company expects to launch its Phase I study in late September 2017.  If early safety results are positive, the first expansion cohort will be launched early next year followed by a pivotal study by year-end 2018 assuming that data are supportive.

CK-301, as with other anti-PD-L1s, removes a cancer cell’s ability to hide from the immune system’s killer T-cells.  This is a proven technology, with other examples such as Tecentriq (atezolizumab), Bavencio (avelumab) and Imfinzi (durvalumab) grabbing headlines in both Europe and the US for moving through the approval process in a number of cancer indications.  In a preclinical comparison of CK-301 with the above FDA-approved anti-PD-L1s, T-cell activity was similarly positively correlated with higher levels of drug antibody, as shown in the below experiment from the company’s poster presentation at the 2017 AACR annual meeting.

PD-1 and PD-L1 inhibitors are widely applicable to many types of cancers, but generally only benefit 20% to 25% of patients as a monotherapy.  Success rates are higher when CD8+ T-cells have infiltrated the tumor and the T-cells have acquired the ability to recognize specific antigens that exist within the tumor cells (i.e., turning a cold tumor into a hot tumor).  For example, using the company’s EGFR inhibitor, CK-101, in conjunction with CK-301, a checkpoint inhibitor, may have synergistic effects as it lyses tumor cells which releases these antigens and activates the adaptive immune system in the tumor micro-environment. 

Combination therapy that uses checkpoint inhibition as a backbone has shown substantial promise in numerous preclinical and clinical studies performed across a menu of companies.  Many of the leading players in the oncology space want to pair their immuno-oncology candidates with internally owned checkpoint inhibitors so they can maintain better control over pricing and not cede market dominance to Merck’s Keytruda, Bristol-Myers’ Opdivo or one of the other market entries.  

Many have recognized the value of checkpoint inhibitors, and even in the early days before their efficacy was proven, transactions for members of this class were in the billions of dollars.  Bristol-Myers initially acquired Medarex for $2.4 billion in 2009 to own rights to Yervoy and eventually Opdivo, while Schering-Plough (later acquired by Merck) bought Organon BioSciences for $14 billion for a portfolio of developmental drugs, including the checkpoint inhibitor, Keytruda.

More recently, there have been other acquisitions for companies that have developed checkpoint inhibitor programs.  On July 5th of this year Celgene announced that it had acquired the ex-Asia rights to BeiGene, Ltd’s (BGNE) PD-1 inhibitor, BGB-A317 for $263 million in upfront license fees, a $150 million equity investment and $980 million in potential milestones.  The deal also gives BeiGene the rights to develop Celgene’s China cancer portfolio. Currently, BGB-A317 is in Phase II clinical trials for Hodgkin’s Lymphoma which began in April of this year with topline available by the end of next year.  

Celgene also entered into an agreement with AstraZeneca (AZN) to develop their PD-L1 inhibitor Imfinzi (durvalumab) in serious blood cancers.  In this 2015 deal, Celgene paid an upfront $450 million for commercialization and royalty rights.  The FDA granted accelerated approval to Imfinzi in May 2017 for bladder cancer.  The drug is also in Phase III trials for a variety of other cancers as well.

In November 2014, Pfizer (PFE) entered into an agreement with Merck KGaA (MRK.F) to develop Bavencio (avelumab) when the compound was in Phase I clinical studies.  Pfizer agreed to pay an upfront amount of $850 million plus milestones with a value up to near $2 billion.  The FDA granted accelerated approval for two indications so far in 2017 and Bavencio is being investigated in at least 12 additional Phase III trials for other cancer indications.  

And on August 17 of this year, a small deal took place between Arcus Biosciences and the Chinese WuXi Biologics.  Arcus paid $18.5 million in upfront payments plus may pay another ~$800 million in milestones to WuXi and their partner Harbin Gloria Pharmaceuticals for a license to develop and commercialize GLS-010, an anti-PD-1 antibody currently in Phase I trials in China.

Additionally, Incyte’s 2015 payment of $25 million upfront and $770 million in potential milestones for Jiangsu Hengrui Medicine’s anti-PD-1 drug SHR-1210 is evidence of the broad interest in finding a checkpoint inhibitor to function as a backbone to other complementary therapies.  

Currently, Checkpoint’s enterprise value is approximately $200 million, and the company has three clinical and three preclinical candidates under development.  The dollar amounts of other transactions for checkpoint inhibitors with upfronts of as much as $850 million and total dollars in the billions suggest a potential value for Checkpoint, based on CK-301 alone, that is well in excess of current levels.  This is without consideration of the multi-billion dollar market opportunity for the company’s clinical-stage EGFR inhibitor CK-101.  

While it is not Checkpoint Therapeutics’ primary goal to be acquired, there are large pharma players that may have interest.  One potential suitor for a checkpoint inhibitor may be Amgen (AMGN), who currently does not have an in-house candidate, but does have plenty of cash and complementary therapies.  Amgen’s portfolio includes programs including BiTE antibodies, oncolytic viral therapies, CAR-T cells and others that all have the potential for synergies with checkpoints. 

Checkpoint Therapeutics has a broad portfolio of targeted anti-cancer and immuno-oncology agents that have shown early promise and suggest substantial upside to the company’s current valuation based on recent transactions that have taken place for other checkpoint inhibitors.  In the cancer space, there is a wide variety of approaches to combat cancer and research has shown that efficacy improves when the disease is approached with a variety of ingredients.  Checkpoint inhibitors have shown that they can have dramatic effects on certain types of tumors and can function as a critical backbone in combination therapy.  Due to the dominance of Keytruda, Opdivo and other checkpoints, many companies that anticipate a benefit from their drug working in combination with this class are seeking their own checkpoint inhibitor to maintain control over pricing and other aspects of their therapies.  Checkpoint Therapeutics is in a strong position to capitalize on this trend with CK-301 which is expected to start first in-man studies later this month.

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