AMAM - Promising Developments In Ambrx's Engineered Precision Biologics

2023-08-21 12:30:54 ET

Summary

• Ambrx Biopharma is a clinical-stage biotech company developing precision biologics for cancer treatment.
• They have a strong financial position with $235.1 million in liquid assets and a cash runway of approximately four years.
• Their leading candidates, ARX788 and ARX517, show promising results in clinical trials for breast cancer and prostate cancer, respectively.

Introduction

Ambrx Biopharma ( AMAM ) is a clinical-stage biotech company developing engineered precision biologics using synthetic amino acids to enhance therapeutic functions. Their focus includes antibody-drug conjugates, with leading candidates ARX788 and ARX517 in trials for various cancers.

In my previous analysis , I noted that Ambrx Biopharma had a strong cash reserve of $149.6 million in Q1 2023, supporting the development of their flagship antibody-drug conjugates, including ARX788. Their focus on engineered precision biologics positions them as a leader in cancer therapeutics. Initial ARX788 trial data showed promise for treating HER2-positive metastatic breast cancer, a condition known for resistance to current treatments. ARX788 outperformed a standard treatment in trials, indicating its potential for significant market share. Despite promising results, I advised prospective investors to consider the risks inherent in biotech investments, and suggested a speculative "Buy" designation, with a modest allocation in a biotech-focused portfolio.

Recent developments: Ambrx Biopharma raised approximately $75M by selling around 5.4M ADS at $13.93 each to Darwin Global Management for R&D and corporate purposes. Meanwhile, the FDA awarded Fast Track designation to Ambrx's experimental antibody drug conjugate ARX517, intended for late-line treatment of mCRPC patients who have not responded to an androgen receptor pathway inhibitor. ARX517 is currently undergoing a Phase 1/2 trial .

The following article discusses Ambrx Biopharma's development of two promising cancer therapeutics, ARX788 and ARX517, their strong financial position, and upcoming presentations on ARX517.

Liquidity & Cash Runway

Ambrx does not appear to have explicitly “reported” Q2 earnings. So, turning, instead, to their balance sheet , as of June 30, 2023, Ambrx held $228.3M in cash and cash equivalents, $6.8M in marketable debt securities, and no long-term investments. This totaled $235.1M in liquid assets. Over the first six months of 2023, the company reported a net cash usage of $26.1M in operating activities, averaging approximately $4.4M per month. The current cash balance would provide a cash runway of around 53.4 months if the average monthly burn rate remains consistent. However, these estimates are my own and may differ from other analyses. Ambrx has a healthy liquidity position with total current assets of $241.4M against total current liabilities of only $18.2M. With total liabilities at $29.6M and total shareholders' equity at $250.4M, the company appears to have a solid financial position with low leverage. It seems unlikely that the company would require additional financing in the near term, considering the current liquidity and the length of the estimated cash runway.

Ambrx's ADC ARX517 Offers Targeted Approach to mCRPC Therapy

Ambrx Biopharma has garnered Fast Track designation from the FDA for its experimental antibody-drug conjugate ((ADC)), ARX517, designed to treat metastatic castration-resistant prostate cancer (mCRPC) patients unresponsive to androgen receptor pathway inhibitors. Currently undergoing a Phase 1/2 trial, ARX517 targets the prostate-specific membrane antigen (PSMA), a protein abundantly present in mCRPC.

The ADC's unique mechanism of action may offer significant benefits for mCRPC patients. According to Ambrx, ARX517 consists of a fully humanized anti-PSMA monoclonal antibody linked to a potent microtubule inhibitor. By specifically targeting PSMA on cancer cells, the ADC is internalized and releases its cancer-killing payload within the cell, maximizing tumor cell destruction while minimizing off-target toxicity. This precision approach can address the high unmet medical need in mCRPC treatment.

At the ESMO Congress 2023 in Madrid, Spain, from October 20-24, Ambrx will unveil preliminary safety, efficacy, and pharmacokinetic data from the APEX-01 trial of ARX517. These presentations, marking the first disclosure of clinical data on ARX517, will cover the ADC's stability, pharmacokinetic profile, and evaluations in preclinical models. Ambrx will also showcase preclinical data on ARX305, another ADC targeting CD70-expressing cancers. Given ARX517's targeted approach and promising preclinical data, its further development may prove significant for addressing the challenges of treating mCRPC.

FDA Fast Tracks Ambrx's ARX788 for HER2-Positive Metastatic Breast Cancer

Ambrx Biopharma's leading product candidate, ARX788, is an anti-HER2 ADC under investigation for treating breast, gastric, and other solid tumors. The U.S. FDA awarded Fast Track Designation to ARX788 in January 2021 for treating HER2-positive metastatic breast cancer patients previously treated with anti-HER2 regimens. The drug is currently undergoing various clinical trials, including the Phase 2 ACE-Breast-03 study in the U.S. and the I-SPY 2 Trial for early-stage HER2-positive breast cancer.

In China, ARX788 is in a Phase 3 trial, ACE-Breast-02, led by Ambrx's partner NovoCodex Biopharmaceuticals Ltd., a subsidiary of Zhejiang Medicine Co. Ltd. The trial's interim analysis met its primary efficacy endpoint, showing better progression-free survival [PFS] than the control group. NovoCodex has applied for marketing approval in China.

Financially, Ambrx benefits from its partnership with Zhejiang Medicine Co. Ltd. (ZMC) and NovoCodex for ARX788's development and commercialization. Under the ZMC Agreement, ZMC covers the costs of ARX788's development, regulatory approval, and commercialization in China and funds Phase 1 clinical trials in other approved regions. ZMC holds commercial rights in China, while Ambrx retains rights outside China.

Ambrx will receive low double-digit tiered royalties on ARX788 sales in China, potentially reaching the "mid-teens range" on aggregate net sales. These royalties will continue until the later of patent expiration or 20 years after ARX788's first commercial sale in the PRC. Ambrx will also pay royalties on sublicensing profits or net sales outside the PRC, depending on clinical development phase or market authorization based on Phase 1 data from the collaboration with ZMC.

My Analysis & Recommendation

In conclusion, Ambrx Biopharma appears to be on a promising trajectory with its lead drug candidates ARX788 and ARX517. The company is well-positioned to capitalize on a significant market opportunity in the field of engineered precision biologics for cancer therapeutics. The preliminary results from ARX788's clinical trials, particularly in China, show promising outcomes, highlighting its potential to gain a significant market share in the treatment of HER2-positive metastatic breast cancer. With its innovative approach of using antibody-drug conjugates to target specific proteins in cancer cells, the company stands to address the high unmet medical need in the treatment of mCRPC with ARX517.

Financially, Ambrx appears to be in a strong position, with ample cash reserves and a relatively low monthly net burn rate. The estimated cash runway of approximately four years, coupled with minimal debt and total liabilities, should provide the company with sufficient time and resources to continue developing its lead drug candidates. Additionally, the company benefits from its partnership with ZMC and NovoCodex for the development and commercialization of ARX788, ensuring that it will receive royalties on sales of the drug in China.

As investors look ahead to the coming weeks and months, they should keep an eye on the company's upcoming presentations at the ESMO Congress in Madrid, Spain. The preliminary safety, efficacy, and pharmacokinetic data from the APEX-01 trial of ARX517 will provide key insights into the potential of the drug in treating mCRPC. Additionally, the disclosure of preclinical data on ARX305, another ADC targeting CD70-expressing cancers, will help to gauge the company's broader portfolio of drug candidates.

Given the potential for both ARX788 and ARX517 to address critical unmet medical needs, combined with the company's strong financial position, I still recommend investors to consider a "Buy" designation for Ambrx Biopharma. The company's innovative approach to cancer therapeutics, promising preliminary results, and strategic partnerships position it well for future growth.

Risks to Thesis

When the facts change, I change my mind.

In recommending a "Buy" designation for Ambrx Biopharma, there are some risks to consider. First, while the company's drug candidates ARX788 and ARX517 show promise, they are still in the clinical trial stage, and there is no guarantee that they will receive regulatory approval. The biotech industry is known for its high failure rate in drug development. Second, Ambrx's success largely depends on the commercial viability of its drugs, which is uncertain until they are brought to market. Third, the company's financial health is reliant on its partnership with ZMC and NovoCodex for the development and commercialization of ARX788. Any disruption to this partnership could negatively impact the company. Lastly, the inherent volatility of the biotech sector means investors should be prepared for potential price fluctuations in Ambrx's stock.

For further details see: