CRBU - Caribou Biosciences: Upcoming CB-010 Data Could Send The Bears Packing

2023-11-26 23:42:58 ET

Summary

• In July, Caribou Biosciences reported positive data from the Antler study of its CAR-T therapy, CB-010, and a $25M investment from PFE.
• Data from the dose expansion portion of the Antler study are expected in H1'24, but given previous conservative guidance for timelines from CRBU, might come in Q1'24.
• The Company has $396.7M in cash, which it expects to fund operations into Q4'25.

The bears of the biotech sector haven't spared Caribou Biosciences ( CRBU ). In July the company announced a $25M equity investment from Pfizer ( PFE ) followed by compelling clinical data from a trial of its next-gen CAR-T therapy, leading the stock to rally over 100% in about a week. A 50% sell-off in the four months since however, led the stock back where it started. In early November, the stock rallied again but faded with earnings. A late November run is now underway, but will this rally fade too? This article takes a look.

Figure 1: Year-to-date trading of CRBU. Note a recent rally with earnings also soon faded.

CRBU's allogeneic CAR-Ts

The first positive of CRBU is the platform, CRBU uses a form of CRISPR gene editing to create next-generation chimeric antigen receptor T-cells (or CAR-T) which can kill a patient's cancer cells. CRBU's CAR-Ts are allogeneic CAR-Ts, so don't require harvesting cells from the patient being treated (unlike with autologous CAR-Ts).

Although this is only a bit of a negative, of CRBU's three CAR-T therapeutics at the clinical stage, CB-010 is the most advanced and has only reported data from 16 patients with relapsed or refractory B cell non-Hodgkin lymphoma (r/r B-NHL). That trial is called the Antler phase 1 study.

ANTLER: A phase 1 study of CB-010

Regarding the data so far, while we are stuck with cross-trial comparison, and will probably be stuck in that situation for some time to come, CRBU's data do look impressive. Notably, the company produced a 94% overall response rate (ORR, 15 out of 16 patients) and 44% of patients had a complete response at ?6 months.

In CRBU's November Corporate Presentation, the company notes a six-month complete response rate of 44% compares favorably to numbers seen with autologous CAR-T therapies, which aren't as convenient as allogeneic CAR-T therapies.

Outside of the efficacy comparison to approved autologous CAR-T therapies, CB-010 sees reduced rates of key adverse events like infections and cytokine release syndrome, compared to autologous CAR-Ts.

Timing of future catalysts

The Antler data aren't really new at this point, the rally they provided has faded, so another update would be ideal. CRBU has proceeded to the dose expansion portion of the CB-010 Antler phase 1 study, focusing on second-line relapsed or refractory large b-cell lymphoma patients (r/r LBCL). While CRBU guides for initial data from that cohort in H1'24, which in the world of biotech would often mean Q2'24 or with timeline slippage, mid-2024, which could end up meaning Q3'23, I think the results could come a little earlier than that.

For example on May 31, Bret Jensen put out an article titled, "Caribou Biosciences: Like Watching Paint Dry" in which Jensen lamented the slow pace of pipeline progress. Indeed at the time, such as with Q2'23 earnings, announced on May 9, CRBU had guided to a safety and efficacy update in H2'23 from the Antler study. That update ended up coming on July 13, 2023, so it is surprising the company didn't simply guide to Q3'23.

Further, on March 29, 2023, CRBU announced the company had entered the dose expansion portion of the Antler study. That portion plans to enroll about 30 patients (15 receiving treatment with 80 million cells, and 15 patients receiving treatment with 120 million cells). Still, while we're getting data from 30 patients, instead of 16 this time, CRBU has previously been conservative with guidance on timelines, and the dose expansion will have been ongoing for eight months (April to December, inclusive) by the start of 2024. It should be noted that CRBU has now focused on the subset of r/r B-NHL patients with r/r LBCL, but that subset was 10 out of 16 patients in the data reported in July, so enrolment wouldn't be limited too severely. Taking all this together, a Q1'24 readout doesn't seem out of the question.

CB-011 and CB-012

Outside of CB-010, CRBU has completed dosing with CB-011, another therapy from its CAR-T pipeline, at the first level in its phase 1 CaMMouflage trial in multiple myeloma, but doesn't report any efficacy data in its recent releases. As such it is hard to make any predictions about how CB-011 might perform. Notably, CB-011 is already enrolling at the second dose level (150 million CAR-T cells) following no dose limiting toxicities in three patients treated with the first dose level (50 million CAR-T cells). The possibility of data from the first six or so patients (three at each dose level) in 2024 seems plausible.

CRBU's third CAR-T therapy is a little further behind, however. CRBU only recently received Investigational New Drug ((IND)) clearance for CB-012, so the therapy is now ready to enter phase 1. CRBU's corporate presentation notes the company plans to initiate patient enrollment in its trial of CB-012 in mid-2024, so it might not provide any efficacy data until 2025, in my estimation.

Financial Overview

CRBU raised $134.4M through an underwritten offering in Q3'23, which while being a key development funding-wise, has obviously weighed on the stock. Net cash, cash equivalents and marketable securities were $396.7M at the end of Q3'23, which the company expects to fund operations in Q4'25. R&D expenses were $28.6M in Q3'23 and G&A expenses were $9.7M in the same quarter. CRBU reported a net loss of $10M for Q3'23 and net cash used in operating activities was $71.9M in the first 9 months of 2023. At that rate, and considering CRBU's current cash balance, the company could continue operations for four years. Obviously, with CRBU's other programs getting underway in earnest, cash burn is going to pick up with increased R&D expense, so it is worth deferring to CRBU's guidance of cash lasting into Q4'25.

There were 88,431,136 shares of CRBU's common stock outstanding as of November 2, giving the company a market cap of $500.5M. There were also 9,523,394 options outstanding with a weighted average exercise price of $8.06.

Summary, Rating and Risks

The CB-010 data to date, which although only coming from only 16 patients so far, provide important validation of CRBU's technology (CRISPR edited allogeneic CAR-T). Further, the company's previous conservative guidance on reporting results, and the fact that dose expansion work began in late March, creates the possibility that an update from the dose expansion portion of the Antler study might not be far away. Given previous positive data, my expectation of a near-term update from the Antler study (which I expect to be positive), another shot on goal with early CB-011 data likely in 2024, and cash extending until late 2025, I rate CRBU as a buy. Further, with a sizable raise of cash out of the way in Q3'23, the odds of a near-term raise of cash weighing on the stock are reduced.

The most obvious risk I see to CRBU near-term would be an update on FDA discussions regarding a pivotal trial of CB-010 in second-line LBCL patients. CRBU has stated it plans to share the FDA's feedback on this topic by year-end 2023. If feedback regarding the design of that trial isn't well received by the market (such as a larger-than-expected pivotal trial being needed, or a more risky design being required) the stock would likely fall.

Beyond year-end 2023, data from CB-010 could fail to produce the same high complete response rate seen at six months with the first sixteen patients. A softening of the data could be viewed as expected, but nonetheless confirm the value of CB-010, or it could be viewed as disappointing by the market. For example, if the complete response rate at six months drops below existing CAR-T therapies, the argument for CB-010 would center around potential benefits like safety, convenience, and cost, rather than efficacy. Given the competition in the CAR-T space, CB-010 might fall out of favor and CRBU's stock could fall.

Lastly, while I don't think much expectation exists for CB-011 yet, dose escalation studies can produce dose-limiting toxicities and the announcement of such toxicities or other issues with the therapy would cause the stock to fall.

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