GRTS - A Peek At Gritstone bio's Pipeline

2023-03-21 00:06:20 ET

Summary

• Today, we put our focus on a small developmental concern called Gritstone bio, Inc.
• Gritstone's most advanced program is in a registrational trial, and it also has a potentially significant collaboration deal with Gilead Sciences around a different program.
• An analysis follows in the paragraphs below.

Nothing strengthens authority so much as silence ." - Leonardo da Vinci

Today, we put an intriguing, small developmental concern called Gritstone bio, Inc. ( GRTS ) in the spotlight. The company is advancing its pipeline on several fronts, has a collaboration deal with a well-known drug maker, and its lead candidate is currently in a registration study. An analysis around this 'Busted IPO' follows below.

Company Overview

Gritstone bio, Inc. is a clinical-stage biotechnology company headquartered just outside of San Francisco. The company is focused on developing vaccine-based immunotherapy candidates against cancer and infectious diseases. Currently the stock trades right at $2.50 a share and sports an approximate market capitalization of $220 million.

The company has several candidates within its pipeline. The company's developmental approach seeks to generate a therapeutic immune response by leveraging insights into the immune system's ability to recognize and destroy diseased cells by targeting select antigens. A good two minute video on the company's vision to use a person's immune system to fight cancer can be seen here .

Gritstone's primary focus area is oncology for its vaccine candidates is oncology. It also has earlier stage efforts to treat HIV, COVID19 and Prophylaxis .

Oncology initiatives will be the key focus area in this analysis given they are in a more advance stage of development. That said, it should be noted that Gritstone has a potentially substantial collaboration deal with drug giant targeting HIV, which is in early stage development. The details of which are above.

As can be seen above, there are other players pursuing cancer vaccine development using neoantigens. Gritstone hopes to use these tumor-specific neoantigens , and viral antigens, to generate a positive therapeutic immune response in patients. This is hoped to be the next step to allow the immune system to distinguish cancer cells from noncancer cells.

The company's first and most advanced oncology program is called GRANITE and has received Fast Track Designation from the FDA to potentially treat metastatic microsatellite-stable colorectal cancer or MSS-CRC. This program is currently being evaluated within a Phase 2/3 study as a maintenance treatment in patients with newly diagnosed MSS-CRC who have completed FOLFOX- bevacizumab induction therapy. Positive results it is hoped could lead to an accelerated approval. The design of this registrational study was agreed to with the FDA in the summer of 2021.

Here is how Gritstone defines the GRANITE process on its website :

For each patient, our individualized immunotherapy starts with a routine clinical biopsy. We then sequence the tumor sample in-house and apply our proprietary EDGE™ platform to derive a set of predicted patient-specific neoantigens likely to be presented on the patient's tumor. Using these predicted neoantigens, we will then design an individualized immunotherapy containing the relevant neoantigens to be administered by simple intramuscular injection ."

Initial results from the approximately 80 subjects in the open label Phase 2 component of this registrational study are expected in the fourth quarter of this year. If this data is positive, Gritstone plans to meet with the FDA in the first half of 2024 to align on the appropriate primary efficacy endpoint. They will then be able to initiate the Phase 3 components of this study.

MSS tumors have been referred to as " cold " tumors. In terms of the number of tumor genetic mutations, they are one of the most highly mutated tumor types. These tumors often exist in an environment that suppresses the immune system.

The company also as an ' off the shelf ' immunological program called SLATE. This program utilizes the same neoantigen identification capabilities and delivery system as GRANITE. However, it contains a fixed set of neoantigens that are shared across a subset of cancer patients rather than neoantigens unique to an individual patient. Therefore, it is a much simpler process as off the shelf vaccines can be administered rapidly upon patient selection.

A candidate dubbed SLATE-KRAS produced a 39% molecular response rate in both patients with late-stage MSS-CRC and non-small cell lung cancer (NSCLC). This program seems to have more potential to treat NSCLC as patients in the study with NSCLC who achieved a molecular response saw their overall survival almost double. The next step for this program is to verify findings in a randomized control trial in newly diagnosed metastatic patients. That study is scheduled to kick off later this year.

Analyst Commentary & Balance Sheet

Last week, both BTIG ($20 price target) and Citigroup ($7 price target) reiterated Buy ratings on the stock. Over the past six months, both H.C. Wainwright ($7 price target) and Piper Sandler ($6 price target) have also maintained Buy/Overweight ratings on the shares.

Approximately four percent of the outstanding float in the shares are currently held short. There has been no insider activity in this stock since late in 2021. The company ended fiscal 2022 with approximately $185 million worth of cash and marketable securities on its balance sheet. Last summer the company opened a new $80 million credit facility from Hercules Capital and now infamous Silicon Valley Bank. It had drawn $20 million off that at closing. 75% of this facility is with Hercules, and Gritstone only had around $500,000 of cash on deposit with SVB. Therefore, SVB's collapse should have minimal impacts on Gritstone's operations going forward.

The company had approximately $140 million worth of total operating expenses in FY2022. It also received nearly $20 million in collaboration and grant revenue during the fiscal year. The company's last capital raise was in October when Gritstone raised $45 million via a private investment in public equity. The company is likely to raise additional capital in the foreseeable future. My guess would be sometime soon after initial study results on GRANITE later this year.

Verdict

There are quite a few moving parts here. Positive Phase 2/3 results from GRANITE could lead to eventual approval to treat MSS-CRC, which obviously should be a big boost to the stock. Approval here could also open the pathway to treat other ' cold tumors ' such as ovarian, prostate and breast cancers, which remain largely refractory to simple immune checkpoint blockade. Obviously, disappointing data from GRANITE is the key near term risk factor for investors.

That said and adding in the potential of the SLATE program as well as the HIV collaboration with Gilead, one would think GRTS would merit a higher trading level. The shares current market capitalization is barely above the current net cash on its balance share. Therefore, while any investment in a clinical stage biotech is a high beta investment, GRTS seems to merit a small 'watch holding' pending further development within a well-diversified biotech portfolio.

There are more instances of the abridgment of the freedom of the people by gradual and silent encroachments of those in power than by violent and sudden usurpations. " - James Madison

For further details see: