PYXS - Pyxis Oncology: Making A Bold Acquisition Move But It's Not A Convincing Thesis

2024-01-17 20:15:07 ET

Summary

• Pyxis Oncology is a biotech company focused on developing immunotherapies for cancer treatment.
• Their most advanced pipeline project is sotigalimab, a CD40 agonist, which has shown promising results in melanoma and liposarcoma.
• The company has enough funds to continue operating for 5-6 quarters, but future funding may require dilutive financing.

Topline Summary

Pyxis Oncology ( PYXS ) is a biotech company specializing in the development of novel immunotherapies, including monoclonal antibodies and antibody-drug conjugates, for the treatment of cancer. They have fresh targets for clinical study, which pins some more risk (since they're unproven) but also a lot of opportunity. However, the risks are too high for me to be comfortable entering into a position at this time.

Pipeline Overview

Sotigalimab

In an unusual step, the most advanced clinical pipeline project being worked on by PYXS is one they acquired through buying another company, which was completed back in August 2023 . Sotigalimab is a CD40 agonist, which has been shown to drive antitumor immune responses in preclinical models . PYXS highlights in their pipeline two phase 2 studies: one in melanoma, and one in liposarcoma.

In melanoma , we've seen interesting signals of activity in the frontline setting for sotigalimab plus pembrolizumab, with a response rate of 47% and a disease control rate of 69%. This tracks favorably with pembrolizumab alone, which had response rates in the low 30% range in KEYNOTE-006. Of course, there's nothing to be made about cross-trial comparisons, but it's not a bad sign to start with.

For advanced sarcomas, findings from ASCO 2023 demonstrated a 16% response rate for doxorubicin plus sotigalimab. The company noted in the presentation that doxorubicin alone has response rates under 15%, to give you a picture of how dire these tumors are. Liposarcoma had the longest median progression-free survival (11.9 months) among the different types of sarcoma. This explains why this specific subtype of sarcoma is being targeted in their pipeline.

PYX-201

This antibody-drug conjugate is directed against EDB-fibronectin, a splice variant of fibronectin deposited specifically around tumors. PYXS hopes that this target will allow delivery of a lethal payload directly to the tumor microenvironment, without relying specifically on a tumor cell marker.

The company has been conducting a phase 1 study of PYX-201 in patients with different solid tumors. They presented the design of this study at SITC 2023 , but no clinical results have been posted to date.

PYX-106

PYX-106 is a monoclonal antibody directed against Siglec-15, an immune suppressor that acts independently of the PD-1/PD-L1 axis to reduce antitumor immunity in the tumor microenvironment.

Again, the study design of this phase 1 trial was presented at SITC 2023 , and we are still awaiting early results.

Financial Overview

As of their most recent quarterly filing , PYXS maintained $139.1 million in total current assets, including $14.7 million in cash and equivalents and $118.3 million in marketable debt securities. Their operating expenses were $25.4 million for the quarter, and after other income, the net loss was $23.0 million.

Given these expenses and holdings, PYXS has enough funds on hand to continue operating for another 5-6 quarters, assuming operating expenses do not grow too rapidly. Given the cost reduction efforts they announced back in November , it seems reasonable to expect the cash to stretch at least this far. The company also guided that they're looking for non-dilutive funding by monetizing their acquired royalties from Apexigen, which they acquired in 2023 . These royalties come from a prior licensing agreement inked by Apexigen with Novartis ( yielding deferred revenues of around $5-$6 million ).

Strengths and Risks

Taken alone in, say, January 2023, it would have been very easy to write off PYXS entirely as not very far out of preclinical development. PYX-201 and -106, their main in-house developmental projects, have posted no phase 1 results that I could find, and the company is guiding first results coming out later this year. I do not expect these to give a lot of important information, other than on initial tolerability.

But the Apexigen acquisition opens up a different, more interesting door. Sotigalimab is much deeper in clinical development, which vaults PYXS into a different class of company altogether.

But what to make of the results we've seen so far? In melanoma, sotigalimab might improve outcomes compared with pembrolizumab alone, but it's definitely not a sure thing for this early stage. And soft tissue sarcomas are among the most challenging tumors that oncologists face, with promising drugs like olaratumab infamously showing favorable phase 2 findings (and getting approval) only to be pulled from the market a fter a flunked phase 3 trial . Sotigalimab is likely going to bear more skepticism as a result.

Not to mention the failed phase 2 PRINCE trial that Apexigen gambled on, which showed no evidence of improvement in adding sotigalimab to chemotherapy in terms of survival. In the end, there's a real reason that PYXS was able to get this drug so cheap.

And that 5-6 quarters of cash will become an issue in 2024. What kind of funding can the company leverage from that royalty stream? Unclear. I would anticipate that dilutive financing will be required, even if that's not what PYXS has guided that they intend to pursue.

And I honestly don't see data coming from any of their pipeline projects that would put PYXS in a position of strength to raise funds without a lot of dilutive pain if that comes to pass.

Bottom-Line Summary

Risks on risks on risks make PYXS an immediate "do not buy" for yours truly. Looming cash concerns (unless costs have been severely cut), lack of definitive activity for their main drug, and long, long lead times for their in-house projects make this worth watching, but with too much downside still threatening the investment. PYXS looks like not much more than a gamble to me right now, hence a solid "Hold" (i.e., do not buy) recommendation for me at this time.

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