IBRX - ImmunityBio Isn't Assured Of Bringing Relief For Bladder Cancer

Summary

• Lead drug candidate improves on listed standard treatment.
• Marketing authorization is within reach in 5 months, but the FDA might balk even with a pre-approved trial design.
• The company has money to at least last that long, but approval isn't a sure thing.

ImmunityBio ( IBRX ) is a large (nearly $2 billion market cap) clinical-stage immunotherapy company developing therapies and vaccines that bolster the natural immune system to treat cancers and infectious diseases. Its pipeline claims 17 clinical trials in Phase 2 or 3 development—targeting 9 indications in solid tumors (Figure 1), plus SARS-CoV-2 and the human immunodeficiency virus (Figure 2). The past 52 weeks (Figure 3), IBRX has slightly lagged the reference SPDR S&P Biotech ETF ( XBI ), and has greatly outperformed the Loncar Cancer Immunotherapy ETF ( CNCR ), which has the most IBRX Exposure . Last month’s $157 million capital infusion stabilized the company’s finances but also triggered an ongoing 30% slide in share prices. If the trend persists, investors may find attractive entry points heading into a target PDUFA date of May 23, 2023 for Anktiva, which will more likely than not earn approval based on superior clinical efficacy compared to medical standard of care for a hard-to-treat form of bladder cancer, but they should hedge because of other challenges.

Figure 1. ImmunityBio Oncology Pipeline

Figure 2 . ImmunityBio Infectious Disease Pipeline

Figure 3. NASDAQ:IBRX chart by TradingView

Interleukin-15 (IL-15) is a naturally-occurring pro-inflammatory cytokine. When co-expressed at the cell surface with binding protein IL-15 receptor ? (IL-15R?), the complex elicits an immune response from NK cells and CD8+ T lymphocytes. Anktiva (also known as ALT-803, N-803 and nogapendekin alfa inbakicept) was created by changing 1 amino acid in the IL-15 sequence (to a mutant known as IL-15N72D) and then fusing an immunoglobulin G1 (IgG1) antibody to IL-15R?. This novel cytokine fusion protein complex acts as a superagonist to IL-15, meaning it has magnitudes more immunostimulatory activity than the original.

The standard of care for non-muscle invasive bladder cancer (NMIBC) following unsuccessful therapy with Merck’s ( MRK ) Bacillus Calmette-Guérin (“BCG”) is surgery, namely cystectomy. In patients who are unfit or unwilling to lose their bladders, Valstar from Endo International ( OTCPK:ENDPQ ) and Merck’s Keytruda were the only two approved treatments by the Food and Drug Administration (FDA) for recurrent CIS and still listed in the National Comprehensive Cancer Network (NCCN) guidelines. Valstar is a 6-week intravesical therapy and is available as generic valrubicin with a current average wholesale price (“AWP”) of $40,000 for the regimen ($58,000 for the brand). Keytruda casts a much bigger economic burden; select patients could be on it for up to 24 months and cost $445,000 for payors, if any, reimbursing at the AWP of $1600 per 100 mg vial. However, Valstar only demonstrated an 18% complete response (“CR”) rate and 21 month median duration of response until time of documented recurrence. Keytruda did better with CRs in 39 of 96 subjects ( 40.6% at 3 months ) and median 16.2 months duration of response. However, only 18 (18.7%) remained in CR for 12 months or longer, yet the PD-1 blocker was approved for the indication in 2020.

The FDA has granted Anktiva Breakthrough Therapy and Fast Track Designations for BCG-unresponsive NMIBC carcinoma in situ ("CIS"). On July 28, the Agency accepted ImmunityBio’s Biologics License Application (“BLA”) for review. The most recently available numbers estimate 712,644 people with bladder cancer living in the U.S. in 2019 and has increased since then. In 2022, the estimated incidence of new bladder cancer cases and deaths in the USA was 81,180 and 17,100 cases. NMIBC accounts for 75% of bladder cancer cases. The highest estimate of BCG efficacy is about 80% , but half of them suffer recurrence as soon as 1 year. Adding in the 20% BCG non-response rate, the total addressable market (“TAM”) for Anktiva is approximately 500,000 individuals for bladder cancer, and this will continue to grow as the rate of people getting the disease is greater than the mortality.

Results from Cohort A of the ongoing QUILT 3.032 trial [QUILT] form the basis of this BLA. Like Keytruda’s KEYNOTE-057 open-label study, and per FDA guidance and agreement, QUILT has no comparator arm. The primary end point (“PEP”) was 'CR rate at any time', defined as the incidence of CR at the 3- or 6-month visit. Overall, the PEP was achieved in 58 of 82 patients ( 71%; 95% CI=59.6% to 80.3% ). Furthermore, 45% CR was attained at 12 months, 33% at 18 months, the median duration of response observed so far was 26.6 months (95% CI=9.9 months to [upper bound not reached]), and the probability of CR at 24 months was 53%.

Even before Keytruda turned in underwhelming response rates, the International Bladder Cancer Group had deemed the FDA's 30% durable response at 18 to 24 months criterion as " likely too high and may not be realistically achievable." But that and the lack of treatments didn't stop the Agency from handing down the dreaded Complete Response Letter ("CRL") in rejecting Sesen Bio's ( SESN ) Vicineum last year for the same indication. While Sesen initially said the CRL only requested additional clinical/statistical data and analyses in addition to clarifying Chemistry, Manufacturing and Controls issues, it later turned into a need for a randomized clinical trial ("RCT") of Vicineum compared to intravesical chemotherapy. Beating chemo shouldn't be too hard, but conducting another study requires time and money, and Sesen decided to pause development instead. To be fair, Vicineum produced underwhelming CRs topping out at 40% at 3 months in the VISTA trial that was never updated since preliminary results were announced in 2019.

Finances

ImmunityBio had $111 million in cash and securities as of September 30, 2022. On December 2, 2022, the company was awarded $156.8 million in arbitration against Sorrento Therapeutics ( SRNE ) for breaches of obligations to provide antibody-based cancer therapies pursuant to two exclusive license agreements. As 20 days have passed with no news, the award amount is final and binding on the parties, although there are no assurances that ImmunityBio will receive the full amount or in a timely manner. On December 12, ImmunityBio sold 9,090,909 shares registered direct offering to a single institutional investor for $50 million, and got another $50 million of debt financing from Nant Capital. Another lending entity by billionaire Dr. Patrick Soon-Shiong, NantWorks, converted $56,625,841.51 in outstanding principal and accrued unpaid interest into 9,986,920 shares of ImmunityBio common stock at a price of $5.67 per share. Because there were 400,304,106 common shares outstanding as of November 4, 2022, the price drop was much larger than the dilution. To the end of Q3, negative cash flows from operations in 2022 totaled $266.4 million, so if they don’t collect from Sorrento, ImmunityBio is likely to issue more shares right after PDUFA.

Risks and Takeaways

A biotech with no products and no sources of income is always risky in a bear market. In a vacuum, ImmunityBio would be a buy on the strength of Antiva’s performance. But there are many moving parts, and not just with the company. ImmunityBio is unusual in that it doesn’t hold earnings calls; even a microcap like Galectin Therapeutics ( GALT ) with no catalysts on the horizon releases regular financial statements. More concerning is the lack of information on the FDA Type B Meeting scheduled for last month (Figure 4). The meeting would’ve concerned QUILT’s Cohort B (BCG-unresponsive high-grade Ta/T1 papillary NMIBC), which also recorded positive data.

There is a chance the BLA could get rejected for various reasons ranging from incompleteness, to concerns with adverse events, to deficiencies in areas other than clinical. Or it could be another Sesen situation. One of the company’s strengths is having its own GMP manufacturing facility, but inspectors might find problems with it. If there are delays in the BLA review, ImmunityBio will need to secure more financing, leading to more share dilution. But with its deep pipeline, the company should survive a rejection.

If Anktiva does earn an FDA nod, it could be priced competitively with Keytruda. At $200,000 per year, it would take 5,000 patients, a sizable fraction of NMIBC patients in the Tis stage, to be a blockbuster. However, another worsening of the global BCG shortage could render approval moot because it curtails the availability of the combo. Then there are indications ImmunityBio isn't ready for a potential launch. The company has not disclosed any plans on how to market Anktiva and no local partners to help in their respective territories. If they decide to go it alone to monopolize earnings, they have no sales force or other commercial infrastructure in place. The worst thing would be a CRL and especially an RCT requirement. To conclude, there are too many uncertainties for this stock to be recommended as a Buy even for the single catalyst event in May. Therefore, placing straddle options past the PDUFA date (such as July 24, 2023) is a viable and probably best strategy.

Figure 4. ImmunityBio Oncology Pipeline Status

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