ALXO - ALX Oncology Holdings: Gilead News Creates A New Risk

2023-10-02 17:43:39 ET

Summary

• ALX Oncology Holdings is developing evorpacept, an engineered protein that targets CD47, a molecule associated with cancer.
• The company is conducting phase 2 trials for evorpacept in head and neck and gastric/GEJ cancer, but results have not been released.
• ALXO has a limited cash runway and faces uncertainties regarding the efficacy of CD47 as a target in different types of tumors.

Topline Summary

ALX Oncology Holdings ( ALXO ) is a biotech capitalizing on interest in developing novel immune therapeutics for cancer medicine. Their main candidate is designed to block CD47, which appears to be important in a lot of different types of cancer. However, we've recently gotten strong signals that targeting CD47 might be a dead end in cancer medicine, at least when you use antibodies to do the job. Now, ALXO is banking on their drug working differently, or on this target being more important outside of where Gilead was studying. This adds a lot of risk to an already-risky project.

Pipeline Overview

Evorpacept

The flagship project under development at ALXO is evorpacept, an engineered protein that is designed to engage CD47, the famous "don't eat me" molecule that has been the subject of much interest in AML over the past several years.

This target is the same one that was being studied by Gilead with magrolimab, a CD47-directed monoclonal antibody that recently had a study discontinued in TP53-mutated AML, which comes after bad news in other indications like MDS. At this time, magrolimab is looking all but dead in the water, unfortunately. It is worth noting that ALXO has also terminated its development of evorpacept in AML and MDS, as well.

This is certainly not the most optimistic place to start the conversation on evorpacept, which, to its credit, does not act in quite the same way as magrolimab despite having the same target.

ALXO has taken evorpacept into phase 2 trials in 2 different forms of cancer: head and neck and gastric/GEJ cancer. The most recent news in the stomach cancer space was orphan drug designation from the European Commission. The company is conducting a phase 2/3 study in combination with available treatment options in second-/third-line, HER2-positive esophagogastric cancer, but we have yet to see results from this study.

Evorpacept is also being assessed in 2 randomized trials enrolling patients with head and neck squamous cell carcinoma, combining anti-CD47 therapy with pembrolizumab in PD-L1-positive advanced HNSCC ( the ASPEN-03 trial ) and another combining with pembrolizumab and chemotherapy for all comers with HNSCC ( ASPEN-04 ).

No results of any of these studies have been made public to date, but the project overall is quite young. We did see a Lancet Oncology publication of phase 1 results across various solid tumors, showing no evidence of intractable toxicity. Moreover, in the dose-expansion portion of the study, 4 of 20 patients with HNSCC responded to evorpacept plus pembrolizumab, and another 4 of 19 with HER2-positive gastric cancer responded to treatment with evorpacept plus trastuzumab. These findings formed the basis for pursuing these indications in larger trials.

Financial Overview

At the end of Q2 2023, ALXO held $38 million in cash and equivalents, with another $175 million in short-term investments, from which they derived $2.6 million in interest income. Meanwhile operations costs reached $36.8 million, for a net loss of $34.2 million.

At this rate, the company has between 6 and 7 quarters of cash runway left. The company does have access to a $100 million loan, of which they've disclosed tapping $10 million so far. The deal was with SVB, but their closure did not impact on the amount of money ALXO will be able to gain from the deal. This could squeeze another few quarters out on the cash runway.

Strengths and Risks

We've got a lot of work to do when it comes to making sense of these novel immunotherapies. In days gone by, if you did a combination study of an agent that has no reported efficacy, then you wouldn't really expect that the combination is really doing that much more than whatever active agent you combined it with.

Take the ASPEN-01 preliminary efficacy findings. 20% response rates for relapsed HNSCC and gastric aren't bad, but evorpacept had no reported single-agent activity. So what would pembrolizumab or trastuzumab alone have done in those patients? With immunotherapy, it's tough to know. LAG-3 inhibitors apparently don't seem to do much on their own, but combined with PD-1? Now you have a drug approval, and the results look pretty convincing.

But ALXO is shooting in the dark all over the place now with these studies. Magrolimab failed to make an impact. Evorpacept studies were terminated. There's only a small signal that combinations are going to move the needle. And we don't know when results are coming, either, with primary completion dates starting in late 2024. Cash is not likely to stretch quite that far, creating yet another risk for jumping in at this point.

Bottom-Line Summary

ALXO has already suffered in terms of valuation from the CD47 news in the summer of 2023. However, I don't know that there are any catalysts coming up that could offset that loss, and it very much remains to be seen whether CD47 is a viable target in the other tumors that ALXO is pursuing. And it may take the rest of their cash runway to get another strong signal, positive or negative. Unfortunately, that spells a pretty strong "don't buy me" signal from where I'm standing, at least at this time.

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