CRDF - A Look At Cardiff: The PLK1 Onco Play With Not Much Runway Left

2023-05-29 00:33:32 ET

Summary

• Cardiff is a small-cap biotech hinging their success on one drug.
• Most of their focus is on one disease area as well which recently entered phase 2 study.
• The cash runway does not currently allow for the completion of the phase 2 study, let alone getting the drug to approval.
• Options for raising further funds are highly limited and should make any would-be investor wary.

Investment Thesis

Cardiff Oncology ( CRDF ) is a microcap company taking on the challenge of some of the world's deadliest types of cancer. While the company has worked to reduce costs and increase their runway, the potential investor today should be extremely wary of the risks of substantial dilution and outright failure of their product candidates, considering the high hurdles the company faces scientifically. Buying in right now would amount to a huge gamble, and we need to see something more solid before the risk seems to fit the reward.

Introduction: What Can CRDF Do for You?

CRDF is an oncology would-be pharma company currently supporting their ventures through one program: the polo-like kinase 1 (PLK1) inhibitor onvansertib. This enzyme controls DNA damage repair during cell division, and it is overexpressed in various forms of cancer .

By disrupting PLK1, CRDF hopes it can selectively target cancer cells and improve outcomes for patients. The company touts a pipeline of trials in solid tumors, most notably metastatic colorectal cancer (in combination with standard chemotherapy plus bevacizumab) and metastatic pancreas cancer (in combination with chemotherapy).

The main trial that CRDF is running is called ONSEMBLE , a phase 1b/2 study enrolling patients with metastatic CRC harboring a KRAS mutation. Patients with this mutation do not benefit from EGFR-directed therapy, thus somewhat limiting their options for therapy. The phase 2 portion of this study just enrolled its first patient back in late March.

This combination of therapies showed some interesting signals of efficacy in patients with KRAS -mutant CRC in a presentation at ASCO GI 2022 . A total of 36% of patients achieved a response, and median progression-free survival of about 9.4 months. This was in the second-line setting, but it shows an interesting glimmer of activity, and the investigators deemed the regimen to be well tolerated overall.

Now we are in for a wait for phase 2 trial data to give a clearer picture of whether onvansertib could fit into the standard of care for mCRC.

CRDF also has quite a few other projects in the pipeline, but these are limited to phase 1 and investigator-initiated studies in pancreas cancer, breast cancer, ovarian cancer, and small cell lung cancer. While these are high-priority areas of development in cancer medicine, as a potential investor I would keep my eyes set on the CRC program, since this is where the bulk of mid-term potential is for this company.

Financial Assessment

In their most recent Q1 filing, CRDF disclosed that they had a total of ~$97 million in short-term assets, including $15 million in cash and equivalents. This is down from $105.2 million in the same quarter for 2022. While they have a small amount of royalty revenues ($83,000 in Q1), this is of course dwarfed by the expenses, mainly centered around research and development.

The overall net loss for the company was $11.2 million, up from $10.9 million in Q1 2022.

Assuming no change in value of the short-term investments and similar increase in expenditure growth (which is reasonable considering these programs only get more and more complicated to run as time goes on), here is the cash runway analysis:

As you can see here, assuming very modest growth of expenses, the cash inflection point for CRDF is around Q4 in 2024, giving them something like a year and a half of cash on hand.

This might be enough time to get enrollment done for the phase 2 portion of ONSEMBLE, but barring extravagantly surprising data, I don't think there's any way this is enough time to get a drug to market. Potential investors should consider it a near guarantee that more funds will need to be raised before 2025, and at the current market cap of $73 million, there just isn't that much room to build out a favorable share sale.

Risks and Challenges

The headwinds facing CRDF boil down to 2 key challenges, from my viewpoint.

1) They don't have enough cash to carry their program to the goal line. And they do not have the capitalization that would be needed to raise funds through a sale of equity without incredibly painful terms. There is the possibility that they get a generous partnership, or a company comes and buys them out, but in my experience, it is not wise to count on these factors to bail out a challenging cash scenario.

2) We do not have enough data for onvansertib or PLK1 inhibition in general to make a clear call on whether this will ever be an approved indication. The tiny bit of data we've seen in mCRC has been backed up with years of preclinical work, but there's a long way to go before clinicians will even begin to start taking this seriously as an actual treatment. In the meantime, the therapeutic arsenal for mCRC is continuing to grow, creating more future competition for CRDF.

These problems are bad enough, but the company's solitary reliance on onvansertib places massive risk on the pipeline. A signal of failure in any of the trials could spell doom for their sentiment on Wall Street, which already isn't high.

Conclusion

CRDF is a massive gamble at these levels, in terms of its cash position and burn; in terms of the tumor types they're going after (CRC has had a long history of failures of promising targeted therapies); and in terms of the timelines they're going to be forced to operate with (beginning of phase 2 is a long way away from a drug approval if it ever comes).

What would it take for me to buy into CRDF? At this point, there is very little that would convince me that an investment in the company is worth it. Possibly a small flier with a few hundred dollars I was fully willing to lose, but CRDF would not make it into my portfolio. The risk to reward just isn't there, I'm afraid.

And that's not to dog the company's science. Things seem to be looking good so far as we can tell, and they are working with great GI cancer specialists in their trials. It's just the road from here to the end is so bumpy and so long that I would expect my invested capital to languish for at least a few years. So at this time I am a firm "no" on recommending this particular equity.

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