StemCell Therapy

Shares of CD47 front-runner Forty Seven (FTSV) have risen by 120% over the past year and by 525% over the past three months. Currently, this growing biotech firm sports a market capitalization of around $1.75 billion, with management executing quite efficiently on accessing financing in mid December with 4.86 million common shares priced at $35 per share (plus underwriter option) for gross proceeds of around $170 million.

Biotech Phoenix, a veteran of the industry who graciously offers insights in our Live Chat from time to time, got me interested in this name when he highlighted the significance of promising clinical data for lead product candidate magrolimab in patients with Myelodysplastic Syndrome (MDS) and Acute Myeloid Leukemia (AML). These are typically indications I'd feel that I don't have an edge in, considering the high amount of competition. However, Phoenix noted that being able to double the objective response rate (ORR) of standard of care at 92% in combination with azacitidine is highly significant.

As I have much to learn about this CD47 pioneer, I look forward to digging deeper to better understand the story here as well as upside prospects in 2020.

Chart

Figure 1: FTSV daily advanced chart (Source: Finviz)

When looking at charts, clarity often comes from taking a look at distinct time frames in order to determine important technical levels to get a feel for what's going on. In the above chart (daily advanced), we can see the impressive gap up after promising results for lead program magrolimab were unveiled at ASH. From there the stock has bounced around in the mid 30s to mid 40s range, currently resting just below the 20-day moving average.

Taking a look at the pipeline, we can see that first-in-class IgG4 antibody magrolimab is being tested out in combination with various approved agents (BTK, CD20, PD-L1, EGFR, etc.) in quite a few different settings.

Figure 2: Pipeline (Source: corporate presentation)

The ASH Investor event is a worthwhile listen to bring readers up to speed on the latest clinical results and their implications for future prospects. Lead antibody magrolimab targets CD47, a potent "don't eat me" signal for macrophages that can enhance the phagocytosis of target cells. Additional molecules can be added to enhance this process (e.g. anti-cd20 antibody rituximab). There are other ways to augment this process by upregulating prophagocytic signals (e.g. adding azacitidine, which has shown impressive synergy in preclinical studies). Another important aspect of this story is emerging data from translational programs that support pursuit of AML/MDS indications (enhanced phagocytosis of target cells can lead to augmented T cell response, bringing adaptive immune system into play). This provides strong scientific rationale for magrolimab in combination with checkpoint inhibitors.

Looking at the pipeline above, we can see the company is focusing on lead indications of MDS and DLBCL. However, they are taking advantage of key collaborations in order to avoid going it alone and speed up trial progress (pacts with Leukemia Lymphoma Society, Roche, AstraZeneca, Eli Lilly, Merck, etc). What's fascinating to me is that through these partnerships they are testing hypothesis for combination of magrolimab with quite a few different molecules, from there letting the data tell them where to direct future efforts. Keep in mind that these collaborations are purely clinical, with Forty Seven retaining rights to its compounds (makes them quite desireable as an acquisition candidate given recent results).

David Sallman, M.D., investigator at Moffitt Cancer Center and Research Institute, provided comments on updated data for Phase 1b studies in AML and MDS, putting the results into context. Sallman notes that higher CD47 expression is predictive of worse prognosis in AML patients in terms of overall survival. Monotherapy study for magrolimab showed it was safe with no maximum tolerated dose reached. Preclinical rationale showed that the combination of azacitidine with magrolimab significantly improved overall survival versus either agent alone (azacitidine induces pro-phagocytic "eat me" signal which synergizes nicely with CD47 blockade of "don't eat me" signal leading to enhanced phagocytosis). The Phase 1b study populations included AML patients that were unfit for intensive induction chemo as well as higher risk MDS patients.

As for dosing scheme, magrolimab is started at a priming dose of 1mg/kg and ramped up to 30 mg/kg by week 2 (to mitigate the on target effect of anemia). By cycle 3 patients receive magrolimab every other week. Azacitidine is considered the gold standard for these patients, receiving 75 mg/m2 days 1-7 (only agent in high risk MDS to improve overall survival). 62 patients were enrolled, with the majority of MDS patients being high risk and 66% of AML and MDS patients of poor cytogenic risk (median age of 70 and 74, respectively). 41% of the AML patients were TP53 mutant (11% in MDS arm). As for safety profile of this combination, the only common adverse event related to magrolimab was on target anemia and only 1 patient discontinued treatment due to adverse events. As for thrombocytopenia, this was identical or even better than azacitidine monotherapy (correlates with earlier and faster response and improvement of blood counts early on in treatment). There were no significant immune-related adverse events on study and no deaths in the first 60 days on therapy.

As for overall response (46 patients response evaluable at 2 months), overall response in MDS and AML was 92% and 64%, respectively. Complete response rate was 50% in MDS and 55% in AML, with median time to response of 19 months (much faster than azacitidine monotherapy). Waterfall plot that follows below is quite impressive.

Figure 3: Promising activity results from treatment of magrolimab combined with azacitidine in AML and MDS Phase 1b trial (Source: ASH Investor Event Slides)

Improvement in quality of response was observed out to 6 months, so a key takeaway is that potentially the CR rate will further improve (1/3rd of cohort had only one disease assessment). There has NOT been a median duration of response or overall survival reached in either patient group (with median follow up of 6.4 months and 8.8 months). The TP53 mutation cohort (9 patients response evaluable) showed combined CR/CRi rate of 78% - this is a group known for much shorter duration of response, but here median duration of response and overall survival were not reached yet. To put data for this group into context, azacitidine plus venetoclax in elderly AML patients had combined CR/CRi rate of 47% (CR rate probably significantly lower) with duration and overall survival of 5.6 and 7.2 months (identical to single agent azacitidine in TP53 mutant patients.

As for the plan to get to market, the company had interactions with the FDA which has led to their commitment to a single arm pathway. The ongoing Phase 1b trial will potentially serve to gain accelerated approval, with the Phase 3 ENHANCE study to begin 1H 2020 to obtain full and ex-US approval. Primary endpoint (aligned with the FDA) is CR rate and duration of CR (enrolling 90 patients). As for regulatory timeline, BLA filing could come as early as Q4 2021.

Figure 4: ENHANCE study design (Source: ASH Investor Event Slides)

Figure 5: High unmet need in MDS= significant commercial opportunity (Source: corporate presentation)

As for AML, it appears management has made the logical decision to go after the indications of 1st line unfit TP53 mutant, 1st line unfit all comers and relapsed/refractory populations. To be fair, the AML landscape is becoming increasingly crowded and I remain more skeptical of how much of the pie they can carve out here.

The anti-cKIT FSI-174 program shouldn't be forgotten, for which a collaboration with bluebird bio (BLUE) was recently announced. It's pointed out that currently less than 1% of patients in the US that could benefit from hematopoietic stem cell transplantation (HSCT) receive HSCT due to risks of adverse events with current conditioning regimens. So, the opportunity to change the current paradigm is quite large and meaningful.

Figure 6: Potential to expand HSC Transplantation (Source: corporate presentation)

When speaking of adverse events of current approaches, specifically this refers to side effects of toxic chemo conditioning and radiation (can result in impaired brain development in children, infertility, development of secondary malignancies and other nasty side effects). The risks of contracting graft-versus-host disease, requirement for life-long immune suppression, possibility of severe infections and other potential complications shouldn't be forgotten as well. Here, Forty Seven hopes to use its all antibody regimen to avoid these toxic side effects, mitigate risk of graft versus host disease and even enable transplantation from non-matched donors.

Several other companies are pursuing similar approaches (Magenta Therapeutics and Molecular Templates, both prior recommendations of mine). Data in non human primates for FSI-174 showed the drug candidate was well tolerated with no adverse effect at the highest dose of 50 mg/kg. Additionally, the combination of this agent with magrolimab was shown to deplete HSCs to desired levels (proving this could be the appropriate alternative to toxic chemo conditioning). A first-in-human study to establish dose and safety should get underway in the near term. From there, per the pact with Bluebird Bio the plan is to utilize this combination to target diseases that could be corrected with transplantation of autologous gene-modified blood-forming stem-cells.

In early January, the company announced a corporate update, stating that with year-end 2019 cash balance of $329 million and current burn rate projections they expect to have an operational runway into Q1 2022. Registration enabling programs are moving forward in MDS (phase 3 ENHANCE study) and DLBCL indications. Midyear we can look forward to updated data from the ongoing Phase 1b clinical trial evaluating the combination of magrolimab and azacitidine in untreated patients with higher risk MDS (should be a significant catalyst). Enrollment in the Phase 1b trial is projected to finish in Q3. As for efforts in DLBCL, a single arm study evaluating magrolimab combined with rituximab (in heavily pretreated relapsed or refractory patients who have failed at least two prior lines of therapy) should get underway with initial data expected in Q4.

Another effort worth paying attention to is expanded enrollment in the Phase 1b trial to include additional TP53 mutant AML patients (untreated, ineligible for induction chemo) to inform a potential registration path. Here, data is also expected mid year and is an important catalyst to look forward to.

Efforts in other potentially lucrative indications shouldn't be ignored, including CRC and ovarian cancer (clinical data to be presented at ASCO GI in late January and ASCO-SITC in February). Learnings here could help inform next steps in solid tumors.

As for the FSI-174 program, as noted above Phase 1 study in healthy volunteers should get underway in Q1. FSI-189 (anti-SIRP antibody) IND application will be filed this quarter as well with Phase 1 study to follow in Q2 for the treatment of cancer.

It should also be noted that the company just filed a $100 million mixed shelf (potentially looking to raise more cash when advantageous).

For the third quarter of 2019, the company reported cash and equivalents of $166.7 million (doesn't include proceeds from secondary offering). Net loss fell to $15.1 million, while research and development expense came in at $27.1 million. G&A expenses rose slightly to $5 million.

As for future catalysts of note, I believe I already touched on them above. I look forward to early solid tumor data to be presented at ASCO GI in late January and ASCO-SITC (would be a big deal to see significant synergy for magrolimab in combination with PD-L1, EGFR, etc.). Updated results in MDS and AML mid year (overall survival and durability) will be quite important as well, and as noted prior we can expect to see CR rates improve.

As for the leadership team, several members of management hail from such well-known names as Abbott, Amgen, Johnson & Johnson, Zogenix, Gilead and others.

As for market intelligence from the ROTY Community, industry veteran BiotechPhoenix gave his 2020 outlook on Forty Seven in terms we can all understand:

This one is simple. It is all about magrolimab, their anti-CD47 drug. There are several combination therapy trials ongoing that should have readouts in 2020. Early indications suggest that CD47 might be the next big immunotherapy checkpoint inhibitor target. If that is true, FTSV is leading in a very lucrative race. I will also add that the CD47 MOA is a checkpoint inhibitor like PD-1/PD-L1. The ORR response rates especially as monotherapy were never that spectacular. Where checkpoints really add value is they have "fat tails" where a modest number of patients usually ~20% or less are able to live for years which is unheard of in many aggressive solid advanced/metastatic solid tumors like NSCLC and Melanoma where typical survival is months. The next big event in CD47 will be FTSV showing it works in combo with a traditional T-Cell/NK checkpoint inhibitor (PD-1/PD-L1). Scientifically it makes a lot of sense since CD47 prevents macrophage "knockdown" on the backend of the immune response while the PD-1 also provides T and NK cell "knockdown" on the front end. Basically the concept is you're plugging two holes in a leaky bucket instead of just one. If this works it has potential to be the next major advancement in oncology.

To conclude, this leader in the CD47 space has reported promising combination data sets for its lead asset magrolimab in AML and MDS, and now has a clear path to move the program forward to eventually pursue accelerated approval in specific indications of high unmet need. This however, is just the tip of the iceberg, as anti-CD47 agents have combination potential with other attractive assets such as checkpoint inhibitors, EGFR inhibitors, etc. If promising results are generated in solid tumors, that could be the catalyst for the next leg up.

For readers who are interested in the story and have done their due diligence, Forty Seven remains a Buy and I suggest accumulating dips in the near term. Looking again at the chart, current levels appear attractive ahead of ASCO-GI followed by midyear results in AML and MDS.

Risks include disappointing clinical results, failure to expand into additional indications including solid tumors, setbacks in the clinic or with ongoing collaborations and also crowded competitive landscape (especially in indications such as AML and DLBCL).

For our purposes in ROTY, I look forward to revisiting this one in the second half of 2020 following updated AML and MDS results. If shares dipped even further to the 50-day moving average, I'd be even more interested in revisiting sooner.

Author's Note: I greatly appreciate you taking the time to read my work and hope you found it useful. Consider clicking "Follow" next to my name to receive future updates and look forward to your thoughts in the Comments section below.

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Disclosure: I am/we are long TRIL. 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.

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Forty Seven: Buy The Dip In This CD47 Pioneer Ahead Of ASCO GI - Seeking Alpha

This entry was posted on January 13, 2020 at 3:49 pm and is filed under Stem Cell Complications. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed. |