Friday, July 08, 2016

Heat Biologics Puts Twist on Immunotherapy

This blog has been primarily devoted to companies producing renewable energy or offering environmental services.  Every once in a while a company comes into view, that is so intriguingly innovative it demands attention even though it is outside the usual menu.   HeatBiologics (HTBX:  Nasdaq) is such a company.  It is a developer of activation immunotherapies against deadly diseases such as cancer. 

Last week the journal Cancer Immunology Research published a study of one of Heat Biologics two technology platforms.  Data from the study suggests the company’s compound led to approximately 50% complete tumor rejection compared to about 16% with naturally occurring molecules that are expressed by natural immune cells.  The study appears to clear the way to human clinical trials.  There was more from this impressive study, but first it is worthwhile to get an overview on Heat Biologics’ markets and therapies as well as other successes in human clinical trials.

Most common cancer in the world
Lung cancer is one of the most common cancers in the world.  It is also one of the deadliest, causing more than 150,000 deaths per year in the U.S. alone.  It is a tricky disease with tremendous diversity in tumors that require equally varied treatments. Non-small cell lung cancer (NSCLC) is one of the two major types of lung cancer and represents about 85% of all cases.  This is Heat Biologics target market so make note of that acronym.  According to Global Business Intelligence, an industry research resource, the value of the NSCLC market in the largest eight developed countries was $5.1 billion in 2013 and expected to grow at a compound annual rate of 6.6% to reach $7.9 billion in 2020. 
There appear to be several novel therapies in the pipeline for NSCLC-type lung cancer, but most are at an early stage of development.  The late-stage pipeline is populated mostly by immunotherapies, demonstrating the building interest in this approach to cancer treatment.  So far checkpoint inhibitors and monoclonal antibodies have received the most attention for treatment of lung cancer, including nivolumab (Opdivo) from Bristol Myers Squibb (BMY:  NYSE).  Approved by the U.S. FDA in March 2015, Opdivo is a monoclonal antibody that works as a checkpoint inhibitor can be used to treat metastatic NSCLC with or after certain chemotherapy.  Monoclonal antibodies are all clones of a unique parent cell.  Checkpoint inhibitors block normal proteins on cancer cells to overcome one of cancer's main defenses against an immune system attack.
Demographic threat
According to the American Cancer Society bladder cancer typically affects older adults, but it can occur in younger individuals as well.  If detected early enough bladder cancer is not life threatening and can be addressed with minimally invasive surgery to cut away the tumor.  Unfortunately, bladder cancer often returns and can spread to other organs.  In later stage bladder cancer surgery might be followed by harsh chemotherapy. 
The bladder cancer market is often sliced up by type with the ‘non-muscle-invasive bladder cancer’ (NMIBC) accounting for about 70% of cases.  The bladder cancer therapeutics market in six of the most developed countries (U.S., Germany, France, Italy, Spain and the United Kingdom) has been estimated by industry research firm GlobalData to be near $177 million annually. The U.S. represents approximately 60% of the total bladder cancer market, in large part because doctors in the U.S. prescribe higher priced drugs.  
Bacillus Calmette-Guerin (BCG) vaccine has been used widely since the 1970s as an immunotherapy against bladder cancer.   However, the introduction of new immunotherapies is expected to more than triple the value of the bladder cancer treatment market to $647 million by 2017.  A monoclonal antibody called atezolizumab (Tecentriq) from Roche Holding AG (RHHBY:  OTC or ROG.VX) was approved in May 2016.  Sometime in 2017, Bristol-Myers Squibb is expected to receive the regulatory go ahead in the U.S. for its monoclonal antibody Opdivo for bladder cancer. 
Intriguingly Different Approach
With an active development pipeline and many immunotherapies in the final stages, some investors might wonder about the chance for commercial success by a newcomer like Heat Biologics.  Competitive challenges notwithstanding, the company’s proprietary technologies are intriguingly different from those of its peers.  If proven safe and effective, those unique technologies could propel Heat Biologics to the forefront of the immunotherapy market.    
Heat Biologics has taken an alternative approach.  Instead of trying to provide individual patients with a treatment specific to their illness, standard platforms have been developed.  The company’s scientists believe this ready-to-use approach will reduce the overall cost and time required for manufacturing compared to personalized vaccines.  The company currently has two platform technologies under development.
The company’s ImPACT platform uses live, genetically modified cells to generate tumor-associated antigens and secrete an immunostimulatory protein called ‘gp96-Ig.’  These proteins mobilize and activate a patient’s own T cells, which are a type of white blood cell at the core of a person’s natural immune system.  Importantly, this protein is specific to the CD8+ cytotoxic T cell or the ‘killer T cell’ that is vital in destroying cancerous cells. 
The ImPACT technology gets its name from ‘pan antigen T cell’ meaning it is effective against multiple tumor-specific proteins.  This distinguishes it from other vaccines, which typically target only one antigen.  The platform has generated two biologic product candidates:  HS-410 for treatment of bladder cancer and HS-110 for treatment of lung cancer. 
The company’s second technology platform, economically called ComPACT, combines the pan-antigen T cell priming vaccine and a T cell co-stimulator in a single drug.  Heat Biologics scientists believe this is the first dual-acting immunotherapy.  The company has planned one biologic product candidate on the ComPACT platform called HS-120 for treatment of lung cancer.  

As mentioned above the journal Cancer Immunology Research recently published a preclinical study of the ComPACT platform.  Among other indications, data from the study suggests the ComPACT technology was successful in improving T cell function and enhancing tumor rejection in melanoma and colorectal cancer.  ComPACT led to approximately 50% complete tumor rejection compared to about 16% with the naturally occurring OX40 molecule that is expressed by a 'killer T cells' in a patients own immune immune system.  The study supports moving ahead to human clinical trials for HS-120.
Reaching the Market
Heat Biologics is already conducting clinical trials for its other therapy candidates.  The HS-410 candidate is being tested in patients with bladder cancer.  This is a Phase II clinical trial aimed at proving how well the drug works for NMIBC as both a monotherapy and in combination with the BCG vaccine. 
The HS-110 candidate is being tested for treatment of lung cancer in combination with Bristol-Myers Squibb’s checkpoint inhibitor called nivolumab (Opdivo).  This Phase Ib trial will assess the safety and tolerability of HS-110 among a small group of eight  cancer patients that are given multiple low doses.  Heat Biologics has high hopes for HS-110 in combination with Opdivo and other checkpoint inhibitors.  Apparently, checkpoint inhibitors are effective in only about 20% of patients because the majority have ‘cold tumors’ with no T cells.  HS-110 is expected to turn these cold tumors into ‘hot tumors’ that can be loaded with T cells.
Valuation Inflection Point
Heat Biologics expects to receive data from the current human clinical trials by the end of 2016.  It is likely to be an inflection point in HTBX valuation as it will bring greater certainly to the viability of the company’s technologies.  Supportive data from the Phase II trial of HS-410 for NMIBC in particular should provide strong support for the Heat Biologic’s technology.
Of course, another critical factor in the valuation of HTBX is the financial strength of the company.  As an early stage biotechnology company, Heat Biologics has no revenue except for the occasional research grant.  Thus cash resources are critical to support ongoing research, development and clinical activities.  At the end of March 2016, the company held $10 million in cash and $1.9 million in short-term investments on its balance sheet. 
The company had been using cash at a fairly fast pace to support operations.  In the first three months of 2016 alone $4.9 million in cash was used for operations.  This suggests there is only enough cash in the bank to keep the lights on until late September 2016.  However, management is confident that with its planned budget, current cash resources are sufficient to see the company through to the next data point now expected before the end of 2016.  Headcount has been reduced and cost control efforts are in place.  As mentioned above, management anticipates new clinical trial results to roll in by the end of 2016.  If the data is as strong as management expects, it should support a capital raising effort aimed at financing the next leg of development. 
HTBX is priced much like an option on the current round of clinical trials and management’s ability to navigate the challenges presented by the drug approval process in the U.S. and other jurisdictions.    It is not likely the stock will begin to reflect the value of future cash flows from its market opportunities until it is more certain Heat Biologics can win regulatory approval of one or more of its therapy candidates. 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. 

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