DCPH - Deciphera Pharmaceuticals: Clawing Its Way Back

2023-08-22 05:06:03 ET

Summary

• Deciphera Pharmaceuticals is focused on the development of their multikinase inhibitor ripretinib for the treatment of gastrointestinal stromal tumor.
• The INSIGHT study is comparing ripretinib against sunitinib in GIST patients who failed imatinib therapy and have specific KIT mutations, showing promising early results.
• The company has gained approvals in non-US markets and is also developing vimseltinib for tenosynovial giant cell tumor, with positive phase 1/2 results and an anticipated phase 3 readout in 2023.

Top-Line Summary

Deciphera Pharmaceuticals ( DCPH )

Pipeline Overview

DCPH rests the bulk of its fortunes on the continued development of their multikinase inhibitor ripretinib, which is approved for the management of gastrointestinal stromal tumor (abbreviated) after failure of 3 or more prior lines of therapy. They have experienced various setbacks over the years, most notably a phase 3 trial failure back in 2021, which I covered in a previous article .

Needless to say, ripretinib has not emerged as the standard of care treatment option, and in the intervening months and years, we've waited for more insights into where the company will take its platform. The biggest shot on goal the company has right now with ripretinib is the INSIGHT study, which is comparing ripretinib against sunitinib in in patients who failed imatinib therapy and who have a specific KIT mutation that (namely, exon 11 +17 and/or 18).

Importantly, the INSIGHT study is confirming an early sign of benefit observed in a subgroup of patients from the INTRIGUE study, that ripretinib seems to work better if the patient harbors these mutations . The response rates for ripretinib and sunitinib in this populations were 23.9% and 14.6%, respectively. Further identification of exon 11 + 17/18 mutations via ctDNA analysis was shown to correspond with improved progression-free survival, response rates, and overall survival with ripretinib. In short, there's good reason to be optimistic about this study,

However, it is worth noting that the INSIGHT study only started enrolling recently, and the primary completion date is 2026, so there is a good deal of road to cover before we see results from this study.

Meanwhile, DCPH has been successful in gaining approvals in non-US markets, as well, with their latest financial filing highlighting the approval in Singapore, as well as reimbursement in Canada. In addition, despite not having approval, the NCCN guidelines have included ripretinib as a second-line treatment option for GIST harboring these mutations.

Vimseltinib

Here is a drug that has come a long way since my last coverage of DCPH. Vimseltinib is a small molecule inhibitor of CSF1R, which the company hopes to market for patients with tenosynovial giant cell tumor. At ESMO 2021, DCPH reported a 50% response rate in their ongoing phase 1/2 study. An update to this study at ESMO 2022 showed that 69% of the 32 patients enrolled achieved an objective response, and all the patients had at least stabilization of their disease. In the phase 2 portion of the study, 56 patients were evaluable for efficacy, and of these, 53% had an objective response.

As of March 2023, enrollment in a phase 3 trial is complete . Now, we await the results of this study, which the company has guided it will announce in the fourth quarter 2023.

Other Efforts

DCPH has a few other projects in the pipeline, namely kinase inhibitors targeting a variety of different potential tumor types. I will not be covering these in depth, as they remain either preclinical or in early-stage clinical development. Without a doubt, DCPH's mid-term future is pinned on the success of ripretinib and vimseltinib.

Financial Overview

As of the end of Q2 2023, DCPH held $81.3 million in cash, with another $247 million in short-term investments. Total current assets were $405 million. Long-term investments and securities were not included in that figure, accounting for another $64 million in potentially liquid assets.

Meanwhile, the company continues to march forward in revenues. They sold $37.3 million worth of ripretinib in Q2 2023, up around 18% from Q2 2022. Clearly, they've been making great strides since my last article, where they had just $23.2 million in revenues.

Still, total operating costs are high at $91 million in the last quarter, which has grown from $76.3 in Q2 2022. This led to a net loss of $48.6 million. The cash position was bolstered in early 2023 through the sale of just about 8 million shares of stock.

If these operating costs remain somewhat steady at 5% growth per quarter, and if the sales trajectory is able to maintain 18% growth year over year, they'd have enough financial runway to get them to the end of 2024. Of course, this is difficult to predict with the sheer number of variables that could impact performance, so take those figures with a grain of salt.

Strengths and Risks

Even with no sales growth, DCPH is set as far as cash goes through 2023 and far into 2024, by which time we will know the results of the MOTION study. Of course, TGCT is a very rare tumor type, but it's a tumor type with a deep unmet need and a nearly untapped market potential for a targeted therapy. An approval here only means good things for the bottom line.

And given the acceptance of second-line ripretinib in GIST, it's possible we could see accelerated approval for this indication based on the findings we've seen to date and contingent on a positive readout of the INSIGHT study.

That said, we're still talking relatively small patient populations that are set to benefit from these therapies, and it's always possible that the trials will not show data sufficient to justify approval. At some point, DCPH is going to need to get their costs under control in addition to scaling up their marketed agents, and we have not seen guidance on how they'll be able to do that in the near term. This presents some risk to potential buyers today, as holding patterns can feel pretty agonizing for these companies.

Bottom-Line Summary

In my last article, I did not feel as though a drop of 75% was justified by the negative INTRIGUE findings. In retrospect, this take has proven at least partially right, as the stock price has recovered substantially and now sits at a 62% gain from the time I suggested a potential buy.

At $14.5 per share at the time of writing, DCPH presents a somewhat less-certain case for me. There's a lot of room to grow, but it requires executing on numerous fronts without a load of bad news. However, the company has the cash it needs to carry itself through major catalysts before they would need to consider another equity raise, so if you're willing to sit still for a little while, this company still has a lot of promise.

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