IBRX - ImmunityBio: Anktiva Rejection Heightens Financial Urgency

2023-05-12 05:20:49 ET

Summary

• ImmunityBio stock dropped over 50% after the FDA issued a CRL for Anktiva, their lead product for treating BCG-unresponsive non-muscle invasive bladder cancer (NMIBC).
• Despite manufacturing deficiencies, the lack of additional FDA requests for preclinical studies or Phase 3 clinical trials hints at eventual approval.
• However, the company's precarious financial position, characterized by a dwindling cash reserve and a substantial net loss of $116.5 million in Q1 2023, amplifies investor apprehension regarding potential regulatory challenges.
• Promising results from the Quilt 3.302 study indicate that the combination of BCG and Anktiva could revolutionize treatment for high-risk NMIBC, offering higher efficacy and safety than current treatments.
• While current regulatory uncertainty and the company's financial status present high risk, the potential market opportunity for Anktiva is significant, suggesting a "Hold" recommendation on ImmunityBio's stock until the company improves its financial standing.

Introduction

ImmunityBio, Inc. ( IBRX ), a clinical-stage biotech company, develops therapies and vaccines to combat cancers and infectious diseases by leveraging the immune system. Their broad immunotherapy platforms target both innate and adaptive immune responses to establish lasting "immunological memory" in patients. They are currently testing nine therapeutic agents in 26 clinical trials for various indications, including infectious diseases like SARS-CoV-2 and HIV. Notably, ImmunityBio's lead product, Anktiva (N-803), received Breakthrough Therapy and Fast Track designations from the Food and Drug Administration [FDA] for treating specific bladder cancer conditions.

On May 9, 2023, ImmunityBio, Inc. announced that it received a complete response letter [CRL] from the FDA concerning its Biologics License Application (BLA) for Anktiva (N-803) used in conjunction with Bacillus CalmetteGuérin (BCG) for treating BCG-unresponsive non-muscle invasive bladder cancer (NMIBC). The FDA's decision to withhold approval for the BLA was primarily based on deficiencies identified during the inspection of the Company's third-party contract manufacturing organizations. While no additional preclinical studies or Phase 3 clinical trials were required, the FDA did request updated data on the duration of response and matured safety information, which appears unrelated to the CRL. In response, ImmunityBio intends to schedule a meeting with the FDA to discuss and resolve the raised concerns in order to expedite the approval process.

ImmunityBio's stock experienced an immediate decline of over 50% due to the release of this news.

This article intends to assess Anktiva's regulatory and market prospects in view of the CRL, as well as delve into ImmunityBio's precarious financial condition.

ImmunityBio's Financials

ImmunityBio disclosed its financials for the quarter ending March 31, 2023, reporting a decrease in cash and cash equivalents from $104.6 million to $88.4 million. The company's research and development (R&D) expenses saw a significant increase, rising to $79.2 million from the previous year's $55.3 million. Meanwhile, selling, general, and administrative (SG&A) expenses decreased to $32.6 million from the previous year's $40.6 million. Ultimately, the company reported a net loss of $116.5 million for the first quarter of 2023, which was higher than the net loss of $102.9 million reported in the same period of the previous year.

On May 9, 2023, ImmunityBio received a non-convertible debt financing of $30 million from its Executive Chairman and Global Chief Scientific and Medical Officer. Despite recent setbacks, ImmunityBio continues discussions with a major biopharmaceutical company to commercialize N-803, with plans to finalize a deal by 2023.

Emerging Challenges and Treatment Gaps in High-Risk Non-Muscle Invasive Bladder Cancer

Bladder cancer , one of the top ten most prevalent cancers globally, accounts for approximately 500,000 cases each year. According to Current Oncology Reports , in the United States alone, there were around 81,180 reported cases and 17,100 deaths in 2022. Non-muscle invasive bladder cancer (NMIBC), which makes up ~70% of bladder cancer cases, is primarily managed through local endoscopic/intravesical therapy and regular monitoring. The likelihood of progression or recurrence in NMIBC depends on factors such as tumor grade and depth.

To address the complexity of NMIBC, organizations like the American Urological Association and European Urologic Association utilize a risk-stratification system to classify NMIBC into low, intermediate, and high-risk groups. Treatment for NMIBC often involves Bacillus Calmette-Guerin (BCG), which can reduce the risk of progression and recurrence. However, there are situations where BCG proves ineffective, resulting in BCG failure, BCG-refractory, or BCG-relapsing cases.

Currently, options for treating unsuccessful BCG therapy are limited (e.g. intravesical valrubicin and systemic pembrolizumab), with radical cystectomy being the established standard of care. Recently, nadofaragene firadenovec, a recombinant adenovirus treatment, has shown promise for BCG-unresponsive non-muscle invasive bladder cancer. In a trial, 53% of patients with carcinoma in situ experienced a complete response within three months. The FDA since approved nadofaragene firadenovec for high-risk BCG-unresponsive cases.

Revolutionizing Treatment for High-Risk NMIBC: Promising Results of BCG & N-803

ImmunityBio's N-803 is an innovative antibody cytokine fusion protein that enhances the immune response by promoting lymphocyte infiltration at disease sites. This unique fusion protein activates Natural Killer (NK) cells and cytotoxic CD8 T-cells, generating Killer T cells instead of regulatory T-cells.

In the Quilt 3.302 study , the efficacy of intravesical BCG mixed with N-803 was evaluated in a standard induction and maintenance regimen for 160 patients with BCG-unresponsive Non-muscle invasive bladder cancer (NMIBC). Recently, data from two cohorts were reported: (1) patients with CIS with or without papillary tumors (n=83) and (2) patients with papillary tumors only (n=77).

The CIS cohort demonstrated a 71% complete response rate with a median duration of 24 months. In the papillary tumor group, the disease-free rates were 57% at 1 year and 48% at 2 years. Importantly, a significant proportion of patients, 91% in the CIS cohort and 95% in the non-CIS cohort, were able to avoid cystectomy. The study reported no severe (grades 4 or 5) treatment-related side effects.

The findings of the Quilt study have the potential to revolutionize the treatment of high-risk BCG-unresponsive NMIBC. Combining BCG with N-803 offers a highly effective alternative that reduces the need for radical cystectomy and its associated complications. Furthermore, the favorable safety profile of the combined therapy is evident from the absence of severe treatment-related side effects.

The Quilt data also presents a substantial market opportunity for BCG and N-803 combination therapy. With a high prevalence of bladder cancer, estimated at 81,180 cases in the United States in 2022 alone, there is a significant potential market size. Considering that ~70% of these cases are NMIBC, and a portion of them do not respond to BCG, there is a considerable patient pool that could benefit from this treatment.

Moreover, the current treatment landscape for high-risk NMIBC, particularly for BCG-unresponsive patients, remains limited. Therefore, if the BCG and N-803 combination therapy successfully completes the approval process, it has the potential to capture a significant portion of this underserved market.

My Analysis & Recommendation

To sum up, ImmunityBio's stock drop of over 50% following the CRL news can largely be attributed to the fact that Anktiva (N-803), its lead product, is pivotal to its pipeline and future growth. The regulatory uncertainty, despite deficiencies being tied to third-party manufacturing and not Anktiva's clinical efficacy or safety, has likely spurred this reaction. ImmunityBio's financial fragility, highlighted by a $116.5 million net loss in Q1 2023 and limited cash reserves, amplifies investor sensitivity towards potential regulatory issues.

Importantly, the FDA hasn't requested further preclinical studies or phase 3 clinical trials, implying a potential future approval for Anktiva. ImmunityBio's swift initiative to engage with the FDA could fast-track problem resolution. Collaborating effectively with its third-party manufacturers to adhere to FDA standards is key to overcoming this setback.

Anktiva's future potential remains significant, as demonstrated by the positive results from the Quilt 3.302 study and the sizable market for innovative treatments for high-risk NMIBC. The superior efficacy and safety of the BCG and N-803 combination, compared to existing treatments, could give it a competitive edge upon approval, especially given the considerable patient pool and the underserved nature of this market segment.

When recommending an investment in ImmunityBio, it's important to balance the immediate hurdles posed by the FDA's CRL against Anktiva's promising future prospects. Substantial returns may be possible, but the uncertainty of Anktiva's regulatory path and the company's financial condition raise the risk level. Despite being optimistic about Anktiva's market potential, the company's current financial situation presents a substantial risk. Therefore, I advise maintaining a "Hold" recommendation (i.e., 'hold' off on adding or buying its stock at present) on ImmunityBio's stock until the company can favorably extend its cash runway.

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