IMCR - Aura Biosciences: Is Now The Time Heading Into Late-Stage Territory?

2023-09-01 08:00:00 ET

Summary

• Aura Biosciences is developing virus-like particles derived from HPV to target specific modifications on tumor cells.
• Their first product candidate, BelSar, has shown potential in halting tumor growth in uveal melanoma, but not shrinking tumors.
• The company has sufficient cash to continue funding operations, but will likely need additional financing to reach their goals.

Topline Summary

Aura Biosciences (AURA) is a cancer-focused biotech developing novel medicines to treat cancer. Their platform, based on virus-like particles made from HPV, is being directed at one rare tumor, as well as bladder cancer. When it comes to brand new platforms like this, we need to see something compelling to justify jumping in, and AURA doesn't really have it, with decent indications that they can halt tumor growth but not shrink it in patients. This makes me very wary about the long-term possibilities for this company.

Pipeline Overview

The virus-like particles that AURA is developing are derived from human papilloma virus (HPV), and they are designed to target specific modifications on the extracellular matrix that are believed to be unique to tumor cells. Specifically, they're hoping to leverage a virus's ability to recognize and bind to specific glycoaminoglycans that are present on the tumor, but less so in normal cells.

By coupling these virus-like particles, AURA hopes to accomplish both delivery of toxic payload as well as generation of a secondary immune response from the viral antigens being present near the tumor.

Belzupacap sarotalocan

This virus-like particle, abbreviated BelSar, is the first product candidate being developed by AURA. This virus-like particle targets heparan sulfate proteoglycans, and in preclinical work it was shown to be taken up rapidly by cancer cells (specifically those of uveal melanoma origin) and induced immunogenic cell death. The payload added to this molecule is a dye that becomes cytotoxic once exposed to near-infrared light. AURA reported at AACR 2022 that BelSar could have antitumor impact on a wide variety of solid cancer cell lines, as well.

The first main target for BelSar is choroidal melanoma, the most common form of uveal melanoma. Although it's uncommon (around 2500 new diagnoses in the US each year), uveal melanoma represents a strong unmet need in the field of dermatologic cancer, since the standard treatment options for cutaneous melanoma (ie, immune checkpoint inhibitors like nivolumab and pembrolizumab) are not very effective here. While there is one drug approved, tebentafusp alfa, it is only for patients of a specific HLA group.

This is a very sensible proving ground for BelSar, since as you can imagine it's very easy to deliver the drug locally, in addition to the near-infrared light that activates the cytotoxic payload. One of the first in-human data readouts came out at ESMO 2022 , featuring safety data on 18 patients enrolled to date in a phase 2 study of BelSar in choroidal melanoma. Safety findings were favorable in this report, with adverse events being all grade 1 or 2 and transient. No dose-limiting toxicities were identified.

These data were updated at the Macula Society 2023 meeting , with 20 patients included for a preliminary efficacy analysis. Across all treated patients, the tumor control rate was 55%, and in the 9 patients who received the highest dose of BelSar, 8 (89%) experienced tumor control. "Tumor control" in this case was essentially stalled tumor growth, with no evidence at the time of presentation of tumor shrinkage. A total of 90% of patients also achieved visual acuity preservation.

AURA guides that their phase 2 trial enrollment is now complete, and updated efficacy are to be presented in the second half of 2023. They're also planning to initiate a phase 3 superiority trial compared with sham subchoroidal injection, with a primary endpoint of time to tumor progression. AURA is also hoping to begin a study of BelSar in patients with choroidal metastases secondary to other forms of cancer, such as breast and lung cancer.

The side note for BelSar is that AURA is also conducting a phase 1 trial in non-muscle invasive bladder cancer, with hopes of presenting data in 2024.

Financial Overview

In Q2 2023 , AURA incurred operational expenses of $20.3 million, while realizing $2.0 million in interest income, for a net loss of $18.3 million. At the end of the quarter, they held $47.7 million in cash and equivalents, with another $114.3 million in marketable securities. Total current assets reached $166.2 million.

They did offset their cash burn a bit, with $1.8 million being raised in the first half of 2023 through sale of stock. Assuming this does not continue, AURA has approximately 8 to 9 quarters of cash and liquid assets on hand to continue funding operations. It is worth noting, however, that clinical trials do not get cheaper to run as they go along, so we can expect expenses to creep upward.

Given that they have not quite reached phase 3 yet, it's reasonable to assume that they'll need another source of financing to move them toward the goal line. The last big cash raise came in December 2022, where they sold 7.7 million shares at $12 per share. And they have a shelf registration to sell upwards of $250 million in equity, of which approximately $11 million has been used so far.

Strengths & Risks

AURA is targeting a market that is wide open right now. As I mentioned, tebentafusp alfa is the only drug that's been shown to work in uveal melanoma , and that's only in patients with a specific HLA subtype. Still, Immunocore ( IMCR ) has already realized $52 million per quarter in sales of tebentafusp, a drug targeting a subgroup of a rare tumor. So the fruit is definitely worth picking here.

The bright red warning light that sticks out to me for now is that the touted phase 2 trial's efficacy showed no evidence of tumor shrinkage. Tumor control is definitely not a bad sign, but it is not really a convincing sign that the drug is doing its job if it can't actually kill tumor. This has been an unfortunate hallmark of interesting biologic-based therapies now in the graveyard.

It will almost certainly not be enough to just stop tumor growth in the eyes of oncologists. They will need to show impacts on overall outcomes, especially survival, and since melanomas of the eye have a strong propensity to metastasize to vital sites like the liver, it's just not going to be that convincing to slow the growth of the tumor alone.

Furthermore, with the primary endpoint of time to progression for their phase 3 trial, it's difficult to see a path forward with the FDA, since their approvals have historically come based on overall survival improvement, or controversially with a progression- free survival improvement, not slowing the progression down. Response rates have also been used to get accelerated approval, but AURA is not touting any responses to BelSar at this time.

For me, these represent deep risks to the company's shot on deck. They have a good bit of cash to see themselves through more data generation, but it's going to need to look better than this. But they're going to continue diluting and eroding shareholder value with the ATM. They have the market cap to absorb this for a time, but it will cause erosion nonetheless.

Bottom-Line Summary

AURA has a really tantalizing, novel target that they're moving forward. However, the evidence I've seen so far just don't inspire enough confidence to justify the $400 million market cap. I think anyone who buys in at this point is in for a generally slow decline as the shares get diluted and the company waits for more late-stage data. And if all they can do is slow tumor growth, then even their long-term prospects don't point to drug approval.

For me, this is a clear case of "steer clear for now," with a strong sell sentiment. I will be eager to see if they're able to generate data that change my mind, because this is an important unmet need.

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