AMAM - Ambrx Biopharma: Very Strong Rally On Positive Data But Unstable Price

2023-05-17 12:27:48 ET

Summary

• Ambrx Biopharma Inc. is up 40x since February after posting positive clinical data.
• However, that sort of rally makes a stock unstable.
• I will watch Ambrx Biopharma Inc. from the sidelines.

Ambrx Biopharma Inc. ( AMAM ) uses an expanded genetic code technology platform to develop Engineered Precision Biologics, including next generation antibody drug conjugates (ADCs). The last 52-weeks have seen a tremendous run for AMAM stock, when it went from below 40 cents to over $13.5, which is a nearly 40x spike. Last year, the company was cutting workforce and finding it tough to gain compliance on NYSE. This year, it had this rally. The huge rally began in mid-February after its phase 1 prostate cancer drug showed promise in the clinical trial. In early March, its breast cancer drug, too, saw promising data in a clinical trial. The two things created a sustained rally in the stock, from which it still hasn't "recovered."

Here's the Ambrx Biopharma Inc. pipeline, by the way:

Lead asset is ARX788, an anti-HER2 ADC, which is targeting neoadjuvant breast cancer, gastric/GEJ cancer and other solid tumors. ARX788 targets the hER2 receptor and " contains two AS269 cytotoxic payloads site-specifically conjugated to a trastuzumab-based antibody." The company claims that its technology solves the problem of a weak linker that prematurely releases its toxic payload before entering the cancer cell, by making its proprietary linkers stronger.

The company's technology is spun out of Scripps Research, and incorporates their synthetic amino acid ((SAA)) into proteins. This allows engineered precision biologics (EPBs) with "site-specific, homogenous and stable conjugation, overcoming limitations of traditional conjugation technologies."

In March, AMAM's partner NovoCodex Biopharmaceuticals published an interim analysis from a phase 3 breast cancer trial of ARX788, meeting its pre-specified interim primary efficacy endpoint with statistical significance. The endpoint was PFS, and the molecule demonstrated a greater progression free survival ((PFS)) benefit compared to the active control. This was the ACE-Breast-02 trial in HER2+ patients with locally advanced or metastatic breast cancers in China, enrolling 441 patients previously treated with taxane and trastuzumab.

The other candidate is ARX517, which is the only ADC that targets the prostate-specific membrane antigen ((PSMA)) expressed on prostate cancer cells. PSMA is "over-expressed in metastatic castration-resistant prostate cancer (mCRPC), as well as in solid tumors (such as pancreatic, non-small cell lung cancer ((NSCLC)) and ovarian)." PSMA has been targeted by a number of radiation-based therapies, as well as immunotherapies. ARX517 has the potential to be the first PSMA-targeted ADC.

In February, the stock spiked after reporting initial data from an ongoing phase 1 trial of ARX517 to treat patients with advanced prostate cancer whose tumors have progressed to at least two prior FDA-approved treatments. The first patient was dosed in 2021, and 22 patients have been dosed across 7 dose levels so far. In group 6, at 2.0 mg/kg, all 3 patients saw a greater than 50% reduction in prostate-specific antigen ((PSA)) levels from baseline. Two of these saw a greater than 90% reduction of PSA levels. One patient had a confirmed partial response. In other groups, as well, PSA reductions >30% were observed.

The drug was generally well-tolerated. No drug-related severe adverse events (SAEs) or grade ?3 treatment-related AEs were observed. MTD was not yet reached.

In its presentation, the company produced comparative data that shows how its molecule fares against other ADCs targeting PSMA:

AMAM is in a very early stage, no doubt, but we can see the reason for the excitement - Seagen Inc. (SGEN) was recently targeted by Pfizer Inc. (PFE) for acquisition for a huge $43bn. Seagen is not, of course, all about ADCs only. However, this just shows how much the technology is being valued - and AMAM claims, with some data, that it may have a next generation ADC product at hand.

Financials

AMAM has a market cap of $666mn and a cash balance of $101mn. It raised an additional $78mn in Q1 through an ATM facility. R&D expenses for Q1 were $9.7mn and G&A was $6.3mn. At that rate, they are funded for 8-10 quarters, or till 2025; although, of course, later stage trials will increase expenses.

Smart money holds a large percentage of the shares, with the highest percentage being held by hedge funds. Key holders are Commodore Capital, Venrock, D. E. Shaw and others. There's not much insider buys; nor sells.

Risks

Ambrx Biopharma Inc. has burst out of its quiet period with a huge rally. I believe such rallies are inherently unsustainable. The company also lacks cash - their cash runway seems long, but if you factor in late stage trials for multiple programs, this sort of cash balance won't cut it. Their data is also quite early stage, so it is difficult to put a lot of value to the stock until we see late stage U.S. data.

Bottom line

Ambrx Biopharma Inc. started with considerable potential as a Scripps Institute spin out, then went into a quiet period for a number of years, got acquired by a Chinese consortium in 2015, had a very bad year in 2022, and has suddenly gone into a hypercharged recovery mode. This is not the time for conservative investors like myself to buy Ambrx Biopharma Inc. stock. I sort of like their value proposition, but Ambrx Biopharma Inc.'s 40x spike in less than 6 months scares me. I will stay away for now.

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