EQRXW - Checkpoint: Strong Data But Comes With Risks

Summary

• CKPT produced strong data for cosibelimab.
• However, data was ex-US and from an open-label trial.
• There's not much cash at CKPT.

Checkpoint Therapeutics ( CKPT ) produced positive results from the registration trial of cosibelimab in skin cancer, however the stock continues to stay depressed from its November highs. What happened in November, why is it still down, and what can make it go back up again - these are the questions.

The funny thing here is that nothing really happened in November. I looked at every possible source of data, and apart from a non-relevant earnings release, there doesn't seem to be any particular event or news that led to the spike and the drop around the first week of November. The only thing that came out was the earnings release, on November 4, and like I said, it contains no clues to the price volatility. I checked insider transaction data , and while the insiders here do not ever buy the stock, there are no large sales around November either. I checked another article by a fellow contributor written around that time, and apart from telling us not to worry, they do not shed much illumination on why the stock fell. There wasn't unusual volume either - a sure sign of price volatility - at that time. However, if you look at the charts vis-a-vis the earnings dates, you will see that the stock peaked exactly on earnings release, and then fell drastically. So my best guess is that investors were looking for more clarity on the cosibelimab data release in the earnings press release, which did not happen, leading to the fall. Recall that data was supposed to have been released by end-2021.

Speaking of unusual volume, on January 25, ~25 million shares changed hands on that date, against an average volume of 200k odd shares. These were mostly sells. This means, funds must have offloaded their entire stakes that day, the same day when cosibelimab data came out. Such a huge sell-off must have been what kept the stock subdued despite positive trial data. So we do not see a spike even on positive data release - which should be a lesson for biotech investors who play catalyst-driven stocks. The lesson is this: it is naive to think that a catalyst alone will push a stock up. There's a lot of volatility hidden under the murky waters of biopharma investing, and therefore things aren't so predictable here.

Coming to the data itself, cosibelimab is an anti-PD-L1 antibody, and it was administered as a fixed dose of 800 mg every two weeks in patients with metastatic cutaneous squamous cell carcinoma (cSCC). Key data were:

• The study met its primary endpoint, with cosibelimab demonstrating a confirmed objective response rate (ORR) of 47.4% (95% CI: 36.0, 59.1) based on independent central review of 78 patients using RECIST 1.1 criteria.

• The median duration of response ((DOR)) had not yet been reached at the data cut-off point (76% of responses are ongoing).

• Safety data across 201 patients with advanced cancers enrolled and treated in all cohorts remain consistent with those previously reported , with the majority of treatment-emergent adverse events reported as Grade 1 or 2 in severity.

Besides metastatic cSCC, the molecule also had an objective response rate (ORR) of 54.8% in 31 patients with locally advanced cSCC.

The company presented competitor data in these two indications. The two approved products are Libtayo and Keytruda. The ORR rates from their pivotal trials are quite similar to cosibelimab's data. However, the company has not provided granularity on complete responses besides saying that they are similar to "what's out there," according to Evaluate . 2020 data did show this to be true. Checkpoint's focus is to get into the PD-L1 market with a lower cost drug. Data is also competitive. However, how the FDA will look at it ultimately decides its fate - and they only have an open label phase 1 trial data here, that too outside the US. Recently, Eli Lilly ( LLY ) and EQRx ( EQRX ) have tried to bring Chinese PD-L1 inhibitors into the US market, however, the FDA has not been too kind, at least not with Lilly, slamming them for their single country trials. Those are risk factors for Checkpoint, however its trial, although ex-US, was not single-country, having taken place in 9 different countries including France, Spain and Australia.

The company also recently wound down the CONTERNO study, a phase 3 study in lung cancer for cosibelimab, citing the Ukraine war as the reason for unsustainably longer enrollment periods.

Besides cosibelimab, Checkpoint has a second asset in phase 3 trial - Olafertinib, an anti-EGFR molecule partnered with other companies in Asia. Unlike other EGFRi like Tagrisso® (osimertinib), which have safety issues like

QTc prolongation (4.5%), interstitial lung disease (3.9%), and cardiomyopathy (2.6%), Olafertinib has a much more benign safety profile.

Financials

CKPT has a market cap of $123mn and a cash reserve of $31mn as of the last quarter. Research and development expenses for the second quarter of 2022 were $12.1 million, while general and administrative expenses were $2.1 million. The cash position, therefore, is precarious, and CKPT may not have cash to last it till 2022.

Bottomline

While the stock price is down and the data is good, I discussed why the data may have regulatory risks. Also the cash position is pretty weak, with strong chances of a dilution on any good news, like a BLA submission. As such, I will continue watching CKPT, but will not be investing now.

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