PSTX - Poseida Therapeutics: Promising Growth Opportunity Due To Its Diversified Pipeline

2023-04-24 14:19:46 ET

Summary

• Poseida Therapeutics is developing cell and gene therapies for cancer and rare diseases, with a focus on solid tumor cell therapy.
• The company's lead product candidate, P-MUC1C-ALLO1, is in a Phase 1 trial for treating various solid tumors, including breast, ovarian, and other epithelial-derived cancers.
• Poseida has a strategic partnership with Roche, which includes licensing for their lead hematological indications and an exclusive license for up to six allogeneic CAR-T cell therapy products.
• P-MUC1C-ALLO1, an allogeneic CAR-T product candidate, has shown promise in early clinical data for safety and efficacy in treating solid tumors.
• Poseida's valuation dipped but its robust pipeline, partnerships, and innovative tech suggest growth potential. Investors should weigh risks and consider a small allocation for this "Buy" recommendation.

Introduction

Poseida Therapeutics ( PSTX ) is a clinical-stage biotechnology company focused on developing cutting-edge cell and gene therapies for the treatment of cancer and rare diseases. By leveraging its proprietary platforms, which include the non-viral piggyBac DNA Delivery System, Cas-CLOVER Site-specific Gene Editing System, and advanced nanoparticle and AAV-based gene delivery technologies, Poseida has successfully established a diverse portfolio of product candidates targeting various indications. The company's innovative platform technologies, either independently or in combination, offer significant potential across a wide range of cell and gene therapeutic modalities, ultimately aiming to address the critical limitations associated with existing cell and gene therapy approaches.

The following article will focus on their cell therapies and, specifically, their lead product candidate, P-MUC1C-ALLO1.

Financials

Let's first review financials. In the fourth quarter of 2022, Poseida reported a significant decrease in revenues, with $10.1 million compared to $31.2 million in the same period of 2021. However, full-year revenues for 2022 reached $130.5 million, a significant increase compared to the $31.2 million reported in 2021, mainly due to collaboration and license agreements with Roche and Takeda. Research and development expenses for the fourth quarter of 2022 decreased, while general and administrative expenses slightly decreased. The company reported a net loss of $33.3 million in the fourth quarter of 2022, compared to a net income of $1.5 million in the same period of 2021. As of December 31, 2022, Poseida had a cash balance of $282.5 million, expected to fund operations until at least mid-2024. Poseida has $91 million in total debt obligations with the majority of that due within the next three years.

In the past few weeks, Poseida's valuation has decreased by more than 60%, bringing it down to its previous value before the Roche agreement, and it is now at around $250 million (market capitalization).

Poseida Advances Pipeline of Solid Tumor Allogeneic CAR-T Product Candidates through Strategic Partnership with Roche

Poseida believes their technologies enable the creation of cell therapy product candidates containing a high proportion of stem cell memory T-cells (TSCM cells) that may potentially lead to enduring responses in patients. The company's current CAR-T therapy portfolio is composed of allogeneic, off-the-shelf product candidates that offer consistent quality and are ready to use. By utilizing insights gained from their autologous programs in hematological and solid tumor indications, Poseida is advancing a robust pipeline of CAR-T product candidates across both types of cancer.

The company is primarily focused on solid tumor cell therapy, with P-MUC1C-ALLO1 currently in a Phase 1 trial that may potentially treat a broad range of solid tumors, including breast, ovarian, and other epithelial-derived cancers. Early clinical data from December 2022 demonstrated safety and efficacy. Poseida is also progressing several other solid tumor allogeneic programs, such as P-PSMA-ALLO1 for metastatic castrate-resistant prostate cancer (mCRPC), which builds upon learnings from the autologous program P-PSMA-101. Additionally, they are exploring a dual target solid tumor program and other combinations, including dual products containing both CAR-T and T-cell receptors (TCRs).

In August 2022, Poseida announced a partnership with Roche, wherein Roche licensed or optioned Poseida's lead hematological indications. The upfront license included Tier 1 programs P-BCMA-ALLO1 (currently in Phase 1 ) for relapsed/refractory multiple myeloma and P-CD19CD20-ALLO1 (preclinical stage) for B-cell hematological indications. Roche also has the option to license Tier 2 programs P-CD70-ALLO1 and P-BCMACD19-ALLO1. Furthermore, they entered into a research collaboration allowing Roche an exclusive license to develop, manufacture, and commercialize up to six allogeneic CAR-T cell therapy products in hematological indications.

Under the Roche Collaboration Agreement , Roche provided an upfront payment of $110 million. Depending on the achievement of specified development, regulatory, and net sales milestones, Poseida is eligible to receive reimbursements, fees, and milestone payments up to $6.0 billion, along with tiered royalty payments on net sales of products from the Tier 1 and Tier 2 Programs, Collaboration Programs, and Licensed Products.

Poseida's PiggyBac DNA Delivery System and Cas-CLOVER Platform Enhance CAR-T Therapies for Solid Tumors

Poseida Therapeutics has harnessed its unique piggyBac DNA Delivery System to generate a highly refined P-MUC1C-ALLO1 product candidate, enriched with a significant proportion of TSCM (T stem cell memory) cells. TSCM cells play a pivotal role in the development of effective CAR-T therapies for solid tumors, as they have been shown to offer long-lasting immune responses and improved persistence, which can contribute to enhanced therapeutic outcomes.

The piggyBac DNA Delivery System serves as a powerful tool for the stable integration of large DNA segments into the host genome, ensuring the stable expression of the CAR (chimeric antigen receptor) within the T cells. This innovative approach allows for the preferential selection of TSCM cells, which possess unique features such as high self-renewal capacity, multi-lineage differentiation potential, and long-term persistence. These characteristics make TSCM cells more effective in combating solid tumors compared to other T cell subsets, thereby highlighting the significance of Poseida's technology.

In addition to the piggyBac system, Poseida employs its proprietary Cas-CLOVER platform to optimize the genetic engineering of T cells. The Cas-CLOVER system is designed to minimize or eliminate the risk of graft-versus-host disease (GvHD) and host versus graft alloreactivity, which are common complications associated with allogeneic cell therapies. GvHD occurs when the donor's immune cells recognize the recipient's tissues as foreign, leading to an immune response that can damage various organs. Host versus graft alloreactivity, on the other hand, occurs when the recipient's immune system attacks the donor's transplanted cells.

By mitigating these risks, the Cas-CLOVER platform improves the overall safety profile of Poseida's allogeneic CAR-T therapies, making them more attractive as potential treatment options for a wide range of solid tumors. This dual-technology approach showcases Poseida's commitment to developing safer, more effective, and cutting-edge cell therapies that address the unmet needs of cancer patients and overcome the limitations of current treatment options.

Clinical Trial of P-MUC1C-ALLO1 Shows Promising Results in Patients with Solid Tumors Expressing MUC1-C

P-MUC1C-ALLO1 is intended for clinical indications where MUC1-C expression is present, as it is expressed in a significant percentage of epithelial cancers, such as breast, colorectal, lung, ovarian, pancreatic, and renal cancers.

The clinical trial of P-MUC1C-ALLO1 in Phase 1 is still ongoing and aims to determine the highest possible dosage that can be safely administered while also evaluating the overall safety and efficacy of the treatment. Additionally, exploratory objectives include analyzing the correlation between tumor expression of MUC1-C and treatment response, as well as expansion kinetics of P-MUC1-ALLO1.

In December 2022, early clinical data was presented at the European Society for Medical Oncology Immuno-Oncology Annual Congress. The data showed that the treatment was safe and well-tolerated with no major side effects observed, such as cytokine release syndrome, GvHD, or immune effector cell-associated neurotoxicity syndrome. Among the four patients evaluated, one with breast cancer showed a partial response, and two with heavily treated gastrointestinal tumors (colorectal and pancreatic cancer) showed stable disease.

Poseida intends to reveal further data at medical conferences as the year progresses.

My Analysis & Recommendation

Poseida Therapeutics has displayed considerable potential in the development of innovative cell and gene therapies for cancer and rare diseases treatment. Their financials demonstrate that while the company experienced a drop in revenue for Q4 2022 compared to Q4 2021, its full-year revenue in 2022 increased significantly. This growth is primarily attributed to collaboration and license agreements with Roche and Takeda. Additionally, with a cash balance of $282.5 million, Poseida's operations are expected to be sufficiently funded until mid-2024.

Poseida's strategic partnership with Roche is a notable strength, as it not only provides financial support but also validates the company's proprietary technology platforms and product pipeline. The upfront payment of $110 million from Roche, along with potential milestone payments and royalties, can support the further development of Poseida's pipeline and bolster its financial position.

The company's focus on solid tumor cell therapy, particularly its lead product candidate P-MUC1C-ALLO1, has shown promising early clinical data in safety and efficacy. The ongoing Phase 1 clinical trial aims to define the maximum tolerated dose, evaluate safety and tolerability, and examine preliminary efficacy and disease response. The positive early clinical results, combined with the anticipated clinical data update in 2023, suggest a strong potential for P-MUC1C-ALLO1 as a treatment option for solid tumors.

Poseida's valuation (near-zero enterprise value) has recently declined significantly without, in my view, any thesis-changing events (Poseida did announce in February their CEO & founder, Eric Ostertag, was stepping down ); however, the company's diverse pipeline, strategic partnerships, and innovative technology platforms make it a potential growth opportunity for investors. Investing in clinical-stage biotechnology companies like Poseida is inherently risky and success is reliant on drug development timelines, clinical trial outcomes, regulatory approvals, and market adoption. Therefore, investors should allocate only a small portion of their portfolio to such investments. Poseida is a "Buy" for risk-tolerant, biotechnology-focused investors.

Risks to Thesis

When the facts change, I change my mind.

While I believe Poseida shows promise, there are several risks to consider:

1. Developmental challenges: Developing gene and cell therapies is challenging due to complex science, strict regulations, high costs, and delivery hurdles.
2. Clinical trial failure: Poseida's success is heavily reliant on the positive outcomes of clinical trials for its lead product candidate, P-MUC1C-ALLO1, and other pipeline products. Clinical trials have inherent uncertainties, and there is a risk that the trials may not meet their primary endpoints, leading to potential setbacks or even termination of the drug development.
3. Regulatory approval: Even if the clinical trials are successful, Poseida must obtain regulatory approval from the FDA or other regulatory bodies to commercialize its products. The regulatory approval process can be lengthy and uncertain, and there is a risk that Poseida may not receive the necessary approvals or may face delays.
4. Competition: Poseida operates in a highly competitive industry with numerous other biotechnology companies and research institutions working on similar technologies and therapies. If a competitor develops a more effective or safer treatment, it could negatively impact the market potential for Poseida's product candidates.
5. Intellectual property disputes: Poseida's success is dependent on its proprietary technology platforms. The company may face intellectual property disputes or challenges from competitors, which could result in costly legal battles and potential setbacks in product development.
6. Market adoption: Even if Poseida's products receive regulatory approval, there is a risk that they may not gain significant market adoption due to factors such as pricing, reimbursement, and competition. Furthermore, medical professionals may be slow to adopt new therapies, which could hinder commercial success.
7. Financial risks: While Poseida has a strong cash position, the company will likely require additional funding to advance its pipeline and commercialize its products. Obtaining additional financing may be challenging, dilutive to existing shareholders, or result in unfavorable terms.

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