KNTE - Kinnate Biopharma: More A Bet Than An Investment At This Early Stage

2023-09-03 05:26:58 ET

Summary

• Kinnate Biopharma is a precision oncology biotech with a unique approach to targeted therapy, but faces challenges in financing and cash burn.
• The company's pipeline includes a drug called exarafenib, which has shown promise in targeting various mutations in solid tumors.
• Kinnate is also developing KIN-3248, a kinase inhibitor for urothelial cancer, and KIN-7136, a MEK inhibitor for BRAF-mutated melanoma.
• These are interesting stories with the potential to move the needle, but as investors I think we'll need to see more first.

Topline Summary

Kinnate Biopharma ( KNTE ) is a precision oncology biotech dedicated to finding new means of attacking targets in oncology, notably through the expansion of targeted mutations. While they have generated some interesting early data and maintain a unique approach to targeted therapy, "early" is going to be a word you hear a lot here, with a subsequent risk of challenging financing activities it will take to bring something to market. Couple that with a high cash burn for a phase 1 company, and anyone buying in today is going to be looking at an "early" round of equity raising, which means substantial risk in the near term for someone looking to get in.

Pipeline Overview

KNTE current has 5 drugs in development in its pipeline, with the most advanced of these being exarafenib, an oral inhibitor of RAF family kinases. What KNTE hopes to differentiate about this agent from the 3 currently approved RAF inhibitors (namely, vemurafenib, dabrafenib, and encorafenib) is that their drug can target RAF of [presumably] any mutations of RAF, as well as mutations of upstream molecules that depend on RAF, such as NRAS mutations.

Currently, KNTE is conducting 2 separate phase 1 trials investigating the safety and efficacy of exarafenib. The first involves exarafenib monotherapy in patients with BRAF or NRAS -mutated solid tumors, and the second is combining exarafenib with the MEK inhibitor binimetinib as a novel approach to metastatic cancers harboring BRAF or NRAS mutations. Currently, BRAF inhibitors are in wide use for this setting, but they only work very specifically on BRAF V600E mutations, so other BRAF mutations or mutations in the RAS/MAPK signaling pathway could get around this inhibition.

To date, we've seen one report of data from these phase 1 studies. At AACR 2023, the company presented abstract CT032 , with data on 60 patients enrolled in 6 dosing cohorts with a wide range of different alterations in RAF and NRAS. Most of the toxicity was skin related, which is common with inhibitors of MAPK signaling in general.

A total of 6 patients achieved a partial response with exarafenib, and this was spread out among the different classes of BRAF mutation and NRAS alterations, with no clear winner rising. This provides an early look supporting the rationale for the drug in patients.

In the combo phase 1 study, the company reported that 2 of 7 patients with evaluable disease had a partial response, including 1 with NRAS-mutant melanoma and 1 with BRAF-mutated pancreatic cancer.

The dose expansions are ongoing, with more data updates anticipated later in the year.

KIN-3248

Another kinase inhibitor KNTE is working on is called KIN-3248, a broad-spectrum FGFR family inhibitor. FGFR plays an important role in the management of urothelial cancer and intrahepatic cholangiocarcinoma in particular, since certain kinds of mutations can leave these cancers sensitive to treatment with agents like pemigatinib and erdafitinib.

These kinase inhibitors have significant limitations, though. In the case of cholangiocarcinoma, there is a very narrow band of mutations that can be impacted by FGFR2 inhibitors, specifically FGFR2 gene fusions or rearrangements. Point mutations and overexpression do not seem to be affected by these agents.

KNTE hopes to tackle FGFR2 and FGFR3 alterations with KIN-3248, and they've generated enough preclinical evidence to justify an ongoing phase 1 study in patients with advanced or metastatic solid tumors with FGFR2/3 alterations. To date, no guidance has been given on when we can expect trial results from this study, though the Gastrointestinal and Genitourinary Symposia in early 2024 might be a good guess.

KIN-7136

KNTE is also working to develop a MEK inhibitor called KIN-7136, which they hope will have significant brain penetration. This is an important issue for patients with BRAF-mutated melanoma, as management of brain metastases is a very sticky issue.

The company has received clearance to begin a phase 1 study evaluating this agent both as a monotherapy and in combination with exarafenib, with the hope of having in their hands a novel RAF/MEK combo that could advance the management of BRAF-altered cancers in the future. It is worth recalling that the RAF/MEK combo of dabrafenib/trametinib has a nearly tissue-agnostic approval for patients with solid tumors harboring BRAF V600E mutations, so there is definitely a market and a lot of research interest for next-generation combos, if they can move the needle.

Financial Overview

KNTE held $34.5 million in cash and equivalents at the end of Q2 2023, with another $150.2 million in short-term investments. In the meantime, they saw increased losses year over year, $34.1 million in Q2 2023 compared with $27.4 million in Q2 2022.

This was offset a little by interest income sitting in market accounts and their investments, accounting for $2.2 million, for a net loss of $31.9 million.

At the current cash burn rate, the company has 1 more quarter of cash on hand, with another roughly 5 quarters in their other current assets.

Strengths and Risks

With a decent balance sheet, KNTE has enough funds to get to early glimpses of their safety and efficacy signals. This is going to be critical, in my opinion, because inhibiting RAF from different angles has the potential of kicking a toxicity beehive, given how important this pathway is to normal cell biology.

More importantly, I want to see how this "extended RAF" hypothesis plays out. There's definitely potential from the clinical perspective to move the management of RAF-associated cancers forward.

But it's early days. VERY early days. And that bodes poorly for any would-be early adopter of this stock, since there's so much that might still go wrong scientifically. And there's a lot of negative news that's almost guaranteed, unless they bring in a big pharma partner. Dilution of some unknowable amount is highly likely, which will erode positions you take today.

And I'm not a fan of counting on big pharma partnerships, especially not at this early stage where they would be more or less mortgaging their product's long-term potential to keep the lights on.

Bottom Line Summary

At this point in their development, we're placing bets, not investments, in this company. If you're one to try and play with volatility, KNTE has a lot of potential in the near term. Mid to long term? It's really anyone's guess how these things will pan out. Cool science stories with interesting rationales have the potential to move treatment forward, but more often they fall flat. I would rather sacrifice a bit of the ground-floor investor glory and wait for solid efficacy signals before I would be willing to consider an investment.

The verdict? This is still quite underdone, and if you get in for the long term right now, the only thing I can almost guarantee is that your position will be diluted over time as you wait for data.

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