CRBU - Caribou Biosciences: Antlers Up Bullish Run In Phase 1 Trials

2023-09-19 08:00:00 ET

Summary

• Caribou Biosciences shows promise with a 94% overall response rate in Phase 1 trials for CB-010, but faces a competitive CAR-T landscape.
• Financially robust with $292.5M liquid assets, but concerns arise from increasing R&D costs and declining licensing revenues.
• Investment Recommendation: "Hold" due to early-stage clinical success counterbalanced by competitive threats and financial sustainability questions.

At a Glance

Navigating a highly competitive CAR-T landscape, Caribou Biosciences ( CRBU ) bets on its proprietary chRDNA technology for precision genome editing. The company's lead candidate, CB-010, has garnered attention with a 94% overall response rate in phase 1 trials for relapsed or refractory B-cell non-Hodgkin lymphoma, but the small sample size and early-stage development warrant cautious optimism. Financials reveal a strategic investment in R&D, seen in a significant Q2 uptick to $26.5M, but declining licensing revenues and a heightened cash burn rate raise questions on operational sustainability. As for stock performance, its volatile nature, toggling between short-term gains and long-term lags, mirrors the firm's own clinical and financial uncertainties.

Q2 Earnings Report

To begin my analysis, looking at Caribou's most recent earnings report for Q2 2023, the notable uptick in R&D expenses to $26.5M, primarily driven by advancing pipeline programs like ANTLER and CaMMouflage Phase 1 trials, signals an aggressive investment in their core competencies. Conversely, a dip in licensing and collaboration revenue to $3.8M—primarily owing to a reduced intake from the AbbVie ( ABBV ) Collaboration—poses concerns about the scalability of these revenue streams. The marginal increase in G&A expenses to $10.1M can be largely attributed to increased headcount and patent-related costs. Lastly, the widening net loss of $29.5M year-over-year accentuates the need for scrutinizing operational efficiency. Overall, these numbers indicate a strategic tilt towards pipeline acceleration, albeit with incremental financial strain.

Cash Runway & Liquidity

Turning to Caribou Biosciences' balance sheet , as of June 30, 2023, the company holds $66.2M in 'cash and cash equivalents,' $193M in 'marketable securities, short-term,' and $33.3M in 'marketable securities, long-term,' amounting to a total of $292.5M in highly liquid assets. Over the last six months, the firm experienced a "Net cash used in operating activities" of $43.1M, translating to a monthly cash burn rate of approximately $7.2M. Calculating the cash runway—by dividing the $292.5M by the monthly cash burn rate—the company has approximately 40.6 months of operational longevity. It's crucial to note that these estimates are based on historical data and may not necessarily project future performance.

Caribou Biosciences exhibits a strong liquidity position, with current assets far outpacing its current liabilities ($268.5M vs. $34.4M). Notably, the company has no significant debt on its books, which gives it financial flexibility. Given the robust liquidity and low debt profile, Caribou appears to be in a favorable position for securing additional financing if needed, either through debt instruments or equity offerings. However, it is worth scrutinizing the company's increasing monthly cash burn, as this could necessitate future capital raises, affecting shareholder value. These are my personal observations, and other analysts might interpret the data differently.

Capital Structure, Growth, & Momentum

According to Seeking Alpha data, Caribou Biosciences' capital structure appears resilient with a market cap of $517.35M, low debt, and a substantial cash reserve, affording financial flexibility. Despite near-term headwinds shown by negative YoY growth in EPS and sales for 2024, there's a sharp revenue uptick expected in 2025 to $38.17M, suggesting long-term potential anchored by innovations like chRDNA technologies. Stock momentum is bifurcated; CRBU outperformed the S&P 500 over 3M (+27.39% vs +0.55%) but trails significantly over 1Y (-54.18% vs +14.07%). This dual narrative underscores the volatile nature of the stock, dictated by clinical milestones and investor sentiment.

CB-011 Alters BCMA CAR-T Landscape with Immune-Cloaking

CB-011 leverages Cas12a chRDNA technology to emerge as an allogeneic anti-BCMA CAR-T cell therapy, offering a unique advantage in the crowded field targeting BCMA. One key differentiator is its 'immune-cloaking' feature, facilitated by the knockout of the B2M gene and introduction of a B2M–HLA-E peptide. This strategy minimizes CAR-T cell rejection by both T cells and NK cells, potentially sustaining antitumor activity for extended durations and lowering relapse risks. Coupled with its allogeneic, "off-the-shelf" nature, CB-011 could offer expedited treatment timelines—critical in cases requiring urgent intervention.

In Caribou's ANTLER Phase 1 trial, the lead asset CB-010 demonstrated robust efficacy in 16 patients with relapsed or refractory B cell non-Hodgkin lymphoma (r/r B-NHL). Specifically, a 94% overall response rate (ORR) was achieved in 15 of 16 patients, and 11 of these patients reached complete response ((CR)). A subset of 10 patients with large B-cell lymphoma (LBCL) yielded a 90% ORR and a 70% CR rate. Importantly, long-term CR was maintained in 44% of the total patient pool (7 of 16) and 50% within the LBCL subgroup (5 of 10). On the safety front, adverse events were consistent with class expectations—no grade 3+ cytokine release syndrome [CRS] or graft-vs-host disease cases were reported. Common adverse events included Grade 3+ thrombocytopenia in 69% of patients and Grade 3+ neutropenia in 56%. Given these positive efficacy and safety outcomes, Caribou is advancing into dose expansion, focusing on second-line LBCL patients.

My Analysis & Recommendation

Caribou Biosciences' compelling early-stage data juxtaposed with financial uncertainties presents a complex investment scenario. The promising initial data from the ANTLER Phase 1 trial of CB-010 in relapsed or refractory B cell non-Hodgkin lymphoma should capture the attention of the oncology-focused investor. The 94% overall response rate and 44% long-term complete response are indeed compelling. However, it's imperative to bear in mind that these findings are preliminary and derived from a small cohort of just 16 patients. Robust efficacy in a phase 1 setting is no guarantee of later-stage success, particularly as patient numbers increase and study designs become more complex.

It's also worth noting that the arena of hematologic malignancies, specifically blood cancers like B-NHL, is fiercely competitive. Giants in the field, such as Novartis ( NVS ) and Gilead ( GILD ), already have commercially approved CAR-T therapies and are not standing still. The efficacy metrics of CB-010 need to be considered in the context of this crowded and evolving landscape. Companies are aggressively pursuing next-gen CAR-T therapies, and some are already working on allogeneic "off-the-shelf" products, which could potentially nullify Caribou's unique proposition over time.

From a financial standpoint, Caribou has managed its capital judiciously. A strong balance sheet with $292.5M in highly liquid assets and a cash runway extending to nearly 41 months provide a solid backstop for continued R&D investment. However, the increasing R&D costs and declining licensing revenues warrant cautious scrutiny. The company's ability to maintain a balanced rate of cash burn will likely dictate the necessity and timing of future capital raises, with potential dilutive impact on shareholder value.

Given the confluence of these factors, my investment recommendation for Caribou Biosciences at this juncture is a "Hold." While the early clinical outcomes for CB-010 engender optimism, they are counterbalanced by a high-velocity competitive landscape and financial concerns that could impose limitations on Caribou's longer-term prospects. Existing investors should hold their positions and monitor upcoming clinical updates, especially as CB-010 moves into dose expansion trials. New investors might find a more opportune entry point following greater clinical validation and a clearer resolution of financial headwinds.

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