KURA - Kura Oncology: Multiple Catalysts Provide Strong Upside Potential

2023-04-19 06:39:26 ET

Summary

• Biotechnology is the second worst performer in healthcare, significantly lagging behind the US market year-to-date. However, there could now be opportunities to get a bargain in the biotechs.
• Kura Oncology may be of interest to investors as this US biotech has a number of projects that could become viable treatments for certain types of cancers globally.
• Shares are trading near historic lows, giving the share price ample room for gains and implying manageable investment risk.
• If the following treatment updates hold promise, they could potentially be powerful catalysts for higher stock prices.

Kura Oncology, Inc. Could Potentially Be a Bargain in the Biotech Space

As can be seen from the print screens of the GuruFocus histogram, healthcare remains the sector hardest hit by rate hikes to combat high inflation and fears of a banking system crisis following the collapse of some small regional banks in the United States.

The gap to the S&P 500 (^GSPC), a benchmark for the US stock market, is still a sizeable 10% as some healthcare components struggle to adjust to the market recovery.

Biotechnology is the second worst player in healthcare, lagging the US stock market by 13% year-to-date. Biotech stocks are suffering more than other sectors from the negative impact of the interest rate hike and the current macroeconomic situation.

The outlook for many biotech companies was revised downwards amid tightening credit conditions coupled with an uncertain future, reflected in a dramatic drop in market valuations as investors deemed the investment risk unsustainable. However, this increases the chance of finding a bargain as lower valuations have also hit good biotech stocks given their potential to develop treatments that look promising today.

Kura Oncology, Inc. ( KURA ) could be of interest to investors looking for bargains in US biotech stocks. This US biotech company continues to make significant strides in the development of a range of products that have the potential to become viable treatments for certain types of cancer in the United States. Therefore, any update that could positively impact Kura Oncology's treatment prospects can become an upside catalyst for the stock price.

About Kura Oncology, Inc.

Based in San Diego, California, Kura Oncology, Inc. is a clinical-stage biotech company developing treatments aimed at precisely targeting specific types of cancer.

Kura Oncology's pipeline consists of small-molecule drug candidates that target abnormalities in cellular signaling pathways critical to cancer development and growth.

Under normal circumstances, cellular signaling pathways are instructions given to the cell for growth and survival, but when the biochemical reactions stop working properly, as in cancer, the cell ignores the signaling and continues to grow when it should instead die and give room to new cells.

Kura Oncology’s Portfolio of Treatments Under Development

The company’s lead candidate is a once-daily oral drug called ziftomenib, which is targeting high unmet needs in US patients with genetic acute myeloid leukemia [AML].

Phase 1 Study of Ziftomenib in Patients with Relapsed/Refractory AML

Data from the phase 1 trial of ziftomenib in relapsed/refractory AML patients, presented at the American Society of Hematology Annual Meeting in December 2022, was encouraging regarding the safety profile of Kura's lead candidate, which also showed some promising clinical activity. Clinical data included a complete response rate of 30% in AML-20 patients dosed at 600 mg, who failed prior treatments, but no median duration of response was achieved.

Phase 2 of the KOMET-001 Trial of Ziftomenib in Patients with Relapsed or Refractory AML

Kura Oncology is currently enrolling patients in Phase 2 of a study called KOMET-001, which aims to evaluate a once-daily dose of ziftomenib 600 mg in patients with relapsed or refractory AML who have a mutation in the nucleophosmin [NPM1] gene.

NPM1 genome alteration is frequently detected in AML.

According to this article , published on June 12, 2020, by Genes (Basel), NPM1 genome alterations are commonly found in AML, at a rate of 20-30% of patients newly diagnosed with AML.

The goal is to enroll 85 patients in the US and Europe, and the study is designed to meet certain requirements including complete response rate, duration of response, need for a blood transfusion, and more data on the safety and tolerability of the treatment.

Ziftomenib in Multiple Phase 1 Studies

Kura will also investigate ziftomenib in several phase 1 studies called KOMET-007, which were scheduled to commence sometime in the first half of 2023. The studies will not only include AML patients with the NPM1 gene mutation but also patients with myeloid lymphocytic leukemia.

The lead product candidate will be administered to multiple patient populations along with the best treatment among the current standards of care for the disease in question.

That said, Kura intends to determine whether ziftomenib can be safely combined with AbbVie Inc. ( ABBV )/Roche Holding AG's ( OTCQX:RHHBY ) Venclexta plus Bristol-Myers Squibb Company's ( BMY ) Vidaza [azacitidine].

Or in a safe combination with Novartis' ( NVS ) Rydapt [midostaurin] or Astellas Pharma Inc.'s ( OTCPK:ALPMY ) ( OTCPK:ALPMF ) Xospata [gilteritinib] coupled with standard induction of Pfizer Inc.'s ( PFE ) Cytosar [cytarabine] plus daunorubicin.

Daunorubicin belongs to the pharmaceutical class of antibiotics [anthracycline] and has been in use for over 60 years.

Cytosar and daunorubicin are administered in a 7+3 regimen such that the patient receives cytarabine for 7 consecutive days plus anthracycline in short infusions administered on each of the first 3 days.

Then Kura will prioritize the combinations that reach the largest population and have the greatest potential in terms of commercial value.

Kura is Investigating Tipifarnib in Head and Neck Squamous Cell Carcinomas [HNSCCs]

Kura is also advancing tipifarnib through studies aimed at evaluating the drug along with Novartis' alpelisib, a drug used to treat breast cancer, in patients with HNSCCs. These patients carry the PIK3CA gene mutations, which are known to be powerful oncogene drivers.

These studies are called KURRENT-HN and are in phase 1/2.

One patient with stage III squamous cell carcinoma of the tonsils and carrier of the PIK3CA mutation showed a durable partial response during the study and provided, albeit preliminary, evidence for the successful mechanism of tipifarnib and alpelisib combination therapy in HNSCC, the company said .

No unknown adverse events or toxicities were reported that could limit dosing during the studies.

Kura is Investigating KO-2806 in Advanced Solid Tumors

In addition, Kura intends to study KO-2806, a next-generation farnesyltransferase inhibitor [FTI], in adult patients affected with advanced solid tumors, following the approval of the Food and Drug Administration [FDA] for the company's Investigational New Drug [IND] application.

The evaluation is progressing through phase 1 of a dose escalation study called FIT-001. The study aims to evaluate KO-2806 from the perspective of safety and tolerability while looking for evidence of antitumor activity.

KO-2806 is being evaluated not only as a monotherapy but also with other treatments in combination therapies.

As a treatment to inhibit farnesyltransferase, KO-2806 blocks the abnormal activity of specific proteins that have been linked to certain types of cancer.

How is Kura Oncology, Inc. doing financially?

Because Kura Oncology, Inc. is still at a clinical stage regarding its pipeline of treatments for AML and solid tumors, meaning it has not commercialized treatments so far, its operations are not yet generating positive income.

For the full year 2022, research and development expenses were $92.8 million, up 9.6% year over year. General and administrative expenses were $47.1 million, up 1.3% year over year.

The biotech developer of cancer treatments reported a net loss of $135.8 million, up 4.1% year over year, including an 11.4% year-over-year increase in non-cash stock-based compensation expense.

Kura Oncology, Inc.'s balance sheet at the end of 2022 shows cash and marketable securities of $438 million, including a $25 million equity investment by Bristol Myers Squibb aimed at enhancing the relationship between Kura and Bristol Myers Squibb and enabling the latter to support Kura's global development strategy with valuable strategic inputs.

The available cash, combined with that from marketable securities, is enough to cover R&D and administration costs for a couple of years, but the company is just absorbing resources and not a penny goes back into operation.

The Stock Valuation

Given the growth potential offered by the rich pipeline of treatments in development and their upcoming update, the current share price level could present an amazing opportunity to strengthen the position in Kura by taking advantage of cheap valuations.

Kura Oncology, Inc. shares are trading at $10.91 as of this writing, well below the trends of the 150-day simple moving average of $13.37 and the 75-day simple moving average of $12.39.

Over the past 52 weeks, Kura's stock price has fluctuated between a floor of $10.30 and a ceiling of $19.93, and now it is very close to the 52-week low.

The 14-day relative strength indicator at 37.49 suggests shares are not far from oversold levels set by the indicator's previous performance at 30, perhaps another hint of an interesting opportunity now to buy shares.

From these levels, the stock price seems to have ample room to grow under the nudge of the following potential catalysts.

Phase 1 of the KOMET-007 study evaluating ziftomenib in patients with bone marrow and blood cancer is scheduled to begin this semester.

The announcement could boost Kura's stock price since NPM1-mutated AML, the study's primary target, accounts for about 30% of AML cases diagnosed each year, according to statistics provided by the company .

Acute myeloid leukemia, or AML, is a rare form of cancer that hits the patient's bone marrow and blood. This form of cancer is quite aggressive and can be fatal if the patient is not treated appropriately.

This form of cancer does not spare the young population, but it is more common in people over 60 years of age. The development of innovative treatments like those in the pipeline from Kura could go a long way in helping AML patients live as long as possible.

Therefore, the market will likely be interested in any development of this study that also targets myeloid lymphocytic leukemia. Lymphocytic leukemia affects lymphocytes — a class of white blood cells — in the bone marrow, but myeloid leukemia can start in other classes of white blood cells or in erythrocytes [red blood cells], and platelets are not excluded from the disease either.

The KOMET-001 study is expected to provide key data on the response, safety and tolerability profile of ziftomenib 600 mg in patients with relapsed or refractory AML, including assessment of blood transfusion requirements, before July 2023.

Between June 2023 and July 2023, Kura is expected to determine the biologically optimal combination of tipifarnib with Novartis' ( NVS ) alpelisib for the treatment of patients with head and neck squamous cell carcinoma.

As for the next-generation farnesyltransferase inhibitor, KO-2806, for advanced solid tumors, the first patients in the dose escalation study are expected to be treated with KO-2806 in Q3 2023.

The last two events could give the stock price significant upside potential to higher levels.

The primary risk of investing in Kura Oncology, Inc. stock is that the updates that the company will announce in the coming weeks may not have the desired effect on the stock price.

However, with share prices technically close to historic lows, adding shares to a position from current levels would involve manageable investment risk.

In addition, there are the well-known factors of monetary policy tightening, increased inflation and the risk of recession, which could put further pressure on the share price. However, these will affect all US-listed stocks, not just this stock, and the current share price levels of Kura should make investors more confident about the risk.

While nothing can be taken for granted in the stock markets, it is very difficult for Kura's stock to trade well below current levels, which are close to being oversold.

Conclusion

Investors looking for bargains in US biotech stocks may be interested in Kura Oncology, Inc.

Shares of this biotech developer are trading near historic lows, giving the stock price ample room for rising. Also, this price level carries a manageable investment risk, should the pipeline of treatments under development disappoint market expectations.

However, if the next updates on treatments are those that the market appreciates, then there could be a lot to gain.

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