CNTA - Centessa Pharmaceuticals: Pipeline Progresses As PRESent-2 Initiated

2023-08-17 11:58:40 ET

Summary

• Centessa Pharmaceuticals takes a unique "asset-centric" approach in the biopharmaceutical industry, offering advantages such as reduced risk, improved efficiency, and greater potential for innovation.
• The company has a strong financial position with a cash reserve of $303.6 million and a projected runway extending operations into 2026.
• Centessa's product pipeline includes innovative therapies for hemophilia B, cancer, inflammatory diseases, and cystic fibrosis, with promising preliminary data and ongoing clinical trials.

Centessa Pharmaceuticals (CNTA) a relatively fresh name in the field of biopharmaceuticals, stands out by bringing together many small biotech assets under one umbrella. Their unique "asset-centric" approach differs significantly from the industry's traditional methods. This model offers advantages such as reduced risk through diversification, improved efficiency, and greater potential for innovation.

Indeed, with a portfolio that spans various stages of clinical development and therapeutic areas, Centessa positions itself as an entity capable of balancing the agility and innovation of small-scale biotech companies with the robustness and resource accessibility of a large-scale organization. This unique approach, when combined with sound financial and strategic decisions, paints the picture of a biotech with significant upside in the near future.

Financials

Digging into Centessa's financial data , the company's cash position stands robust at $303.6 million as of June 30, 2023, augmented further by the $15.0 million in gross proceeds secured through ATM sales in August. With such a healthy cash reserve, the projected runway extending operations into 2026 is not only plausible but allows the company to avoid leveraging further debt. The explicit mention of not needing to draw from the Oberland credit facility underscores this financial strength, offering comfort to investors about Centessa's self-sufficiency in the near term.

R&D expenses were reported at $33.7 million for the second quarter of 2023, a substantial decrease from $53.7 million during the same period the prior year. This drop of almost $20 million year-over-year may indicate greater operational efficiency, completion of costly developmental phases, or a strategic shift in the company's R&D initiatives. Given the nature of the biopharmaceutical industry, R&D costs can often fluctuate based on the progression of drug candidates through various clinical trial stages.

The General & Administrative expenses also saw a reduction, albeit modest, from $14.8 million in the second quarter of 2022 to $13.3 million in the same quarter of 2023. This reduction, while not as significant as the decrease in R&D expenses, still points toward a possible increase in operational efficiency or cost-cutting measures.

A particularly striking observation is the reduction in the Net Loss Attributable to Ordinary Shareholders, which decreased from $64.7 million in Q2 2022 to $24.9 million in Q2 2023. This improvement in the net loss is significant, showcasing the company's ability to manage its operational costs and perhaps benefitting from certain strategic decisions. Notably, a sizable chunk of the reduced net loss is attributed to a tax benefit of $24.1 million due to the release of a valuation allowance on certain U.S. deferred tax assets. While this is a one-time benefit, it undeniably boosts the financial health for the quarter.

Taking a closer look at the burn rate, the net loss for the quarter is $24.9 million. If we assume this quarterly loss rate remains consistent, the annual burn would be approximately $99.6 million. Given the current cash position, minus the expected proceeds from ATM sales (as these funds are not yet realized as of June 30), the company has around 3 years' worth of operational expenses covered. This aligns well with the company's projection of funding operations into 2026.

Pipeline

Centessa's product pipeline exhibits a diversified approach, targeting multiple disease areas with innovative strategies. SerpinPC is a novel inhibitor of activated protein C ((APC)), a potent natural anticoagulant. APC can cause excessive bleeding in patients with hemophilia B, a genetic disorder that inhibits blood clotting. By binding to and inhibiting APC, SerpinPC aims to restore the balance between clotting and bleeding, potentially offering a new treatment pathway for those affected by hemophilia B. While receiving Fast Track designation from the FDA indicates a promising potential for this drug, the Phase 3 trial will be critical for proving its safety and efficacy in a larger cohort of patients.

LB101 is a cutting-edge bispecific antibody called PD-L1xCD47 LockBody that targets two immune checkpoints, PD-L1 and CD47, known for shielding cancer cells from the immune system. Both these proteins play roles in protecting cancer cells from the immune system. By blocking both PD-L1 and CD47, LB101 could enhance the anti-tumor immune response and aid in the elimination of cancer cells. The efficacy of LB101 could be highly dependent on the specific characteristics of the patient's tumor, such as the expression levels of PD-L1 and CD47. Also, it could face significant competition from other immune checkpoint inhibitors currently in the market or in development.

APL-9 is a small molecule inhibitor of complement factor D ((CFD)), an enzyme that can trigger the alternative pathway of complement APC, which can lead to inflammation and tissue damage in diseases such as paroxysmal nocturnal hemoglobinuria ((PNH)). APL-9 aims to selectively inhibit CFD and regulate the APC, reducing inflammation and preserving organ function. However, fine-tuning the immune response without causing adverse effects can be challenging, and the Phase 2 trial will be important for establishing the safety and efficacy profile of APL-9.

ALX-009 combines sodium nitrite and sodium thiosulfate, two compounds that produce nitric oxide (NO) and sulfide (S2-) in the body. These molecules are integral to various physiological processes, including vasodilation, oxygen delivery, mitochondrial function, and cellular metabolism. ALX-009 targets cystic fibrosis ((CF)), a genetic disorder that impacts the lungs and other organs. However, CF is a highly complex and heterogeneous disease, making the development of effective therapies has been historically challenging. Therefore, ALX-009 will need to demonstrate significant benefits in Phase 2 trials to progress further.

PRESent-2 Advances With Dosing Initiation

Centessa Pharmaceuticals announced today the dosing of the first subject in its registrational PRESent-2 study of SerpinPC for the treatment of hemophilia B without inhibitors. The initiation of this phase marks a significant milestone in the development of SerpinPC.

The company's approach to the study is methodical and thorough. Before dosing begins, the trial includes a 12-week observation period for each patient. This allows researchers to gather important baseline data about the patient’s disease status under their current therapy. This is a prudent step, as it will provide valuable context when assessing the benefit and risk profile of SerpinPC during regulatory review.

The fact that this announcement is based on encouraging data from an ongoing Phase 2a study suggests that the company has gathered strong preliminary evidence of SerpinPC's potential efficacy and safety. It is believed to have the potential to be a first-in-class therapy with a differentiated safety profile for people with hemophilia B, pending regulatory review and approval.

Furthermore, the design of the PRESent-2 study demonstrates Centessa's careful approach to determining the most effective dosing regimen for SerpinPC. The study will investigate subcutaneous dosing every week, every two weeks, or every four weeks in a diverse group of patients. The study design features an adaptive component, which allows for alterations based on data accrued during the trial. This strategy helps maximize the potential for success and patient benefit.

The primary endpoint for the study, the rate of treated bleeds expressed as an annualized bleeding rate ((ABR)), will be a crucial metric in determining the potential of SerpinPC. Comparing the ABR during the observation period with the first 24 weeks treated with SerpinPC will provide a clear indication of the drug's efficacy.

Risks in Drug Development Portfolio

For SerpinPC, a significant risk could arise from its novel mechanism of action. As an inhibitor of APC, SerpinPC must strike a delicate balance between inhibiting APC's anticoagulant effects to promote blood clotting and not triggering thrombotic events. Over-inhibition of APC could potentially lead to thrombosis, an adverse event that could be particularly risky for patients with other cardiovascular comorbidities.

LB101 represents a novel approach in the immuno-oncology space. However, the use of bispecific antibodies presents challenges. Ensuring the bispecific antibody appropriately engages with both targets without triggering off-target effects could prove difficult. Additionally, given the immune-modulating nature of this drug, there is a risk of immune-related adverse events, which could be serious and lead to treatment discontinuation.

In the case of APL-9, the role of the complement system in the body is complex and multifaceted. Over-inhibition of the APC could potentially impact the immune system's ability to ward off infections or respond to other immune challenges.

For ALX-009an overproduction of NO and S2- could lead to systemic effects, such as hypotension, as well as local effects, such as bronchospasm, which could be problematic in patients with cystic fibrosis.

Competitors

In the arena of hemophilia B treatment, Centessa's SerpinPC may face competition from established factor replacement therapies and newer gene therapies. Factor IX products such as BeneFIX (Pfizer) ( PFE ) and RIXUBIS (Takeda) ( TAK ) have proven efficacy and safety profiles and are widely used in clinical practice. Gene therapies, such as uniQure's Hemgenix ( QURE ), are promising long-term curative treatment options. However, the true differentiation for SerpinPC lies in its unique mechanism of action and subcutaneous administration, which could offer advantages in terms of convenience and potentially a unique efficacy and safety profile.

The LB101 program, focused on treating solid tumors, faces tough competition from several PD-L1 and CD47 inhibitors in development. For instance, AstraZeneca's durvalumab ( AZN ) and Roche's atezolizumab are approved PD-L1 inhibitors. However, LB101's unique advantage lies in its dual targeting approach, which can block two immune checkpoint pathways at simultaneously, potentially leading to a stronger anti-tumor response compared to single-target inhibitors.

Regarding ALX-009 for cystic fibrosis, Vertex Pharmaceuticals ( VRTX ) dominates the market with its CFTR modulator therapies, such as Kalydeco , Orkambi, Symdeko , and Trikafta . These drugs target the underlying cause of CF in patients with specific CFTR mutations and have revolutionized CF treatment. ALX-009, with its unique approach of using NO and S2 signaling, could provide a novel treatment option for CF patients, particularly those who do not have CFTR mutations responsive to current modulator therapies.

Valuation and Takeaways

Looking at Centessa's valuation metrics, at first glance it may appear that the company is overvalued. A P/B ratio of 3.46 for the clinical-stage company with a market capitalization of $670 million, considerably higher than the sector's average P/B ratio of 2.7, would usually raise eyebrows among valuation purists. However, this number should be appraised with a nuanced lens.

Centessa is uniquely positioned with an expansive and diverse product pipeline, indicating significant latent growth potential. SerpinPC, for instance, has been advancing methodically through trials and has recently reached a pivotal milestone with the dosing of its PRESent-2 study. The preliminary data from its Phase 2a study appears promising, implying that there is considerable upside from its current market valuation, should regulatory approvals swing in its favor. Furthermore, the company's R&D expenses reduction, coupled with a declining net loss year-over-year, signals the harnessing of operational efficiencies while still being deeply embedded in the innovation space.

In a broader context, Centessa has a unique asset-centric approach which allows the company to minimize risk by operating through a portfolio of single-asset companies, each managed by experienced leaders. This, combined with a solid financial footing as evidenced by their cash runway extending into 2026, and multiple significant catalysts on the horizon, places Centessa in a compelling position.

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