TCRR - TCR² Therapeutics: Betting On A Solid Reversal

• TCR² Therapeutics is a company developing two lead oncology drug candidates targeting mesothelin, a protein expressed on different tumors.
• Its lead candidate gavo-cel, or TC-210, has presented strong data so far in different solid tumors, including tumor regression in 94% of evaluable patients and a manageable safety profile.
• TC-510 may report even better results if its preclinical results would translate well to clinical results.
• The market may have been overly critical for TCR²'s September 2021 update on gavo-cel, and meanwhile, its main competitor in the mesothelin space had to report a trial pause.
• I believe the inflection point is near for this company’s stock, trading well below the cash level.

Thesis

TCR² Therapeutics ( TCRR ) develops oncology drug candidates.

The company's stock started selling off around last year's September timeframe, leaving TCR² with a 52-week high of $19,03 and a 52-week low of $2,06. The company trades well below cash value at this point. It has a market cap around $140 million, and had $206 million cash in hand at the end of Q2 2022.

Whereas earlier reporting by the company had been perceived as very positive by the market, the sell-off starting in September 2021 may have been caused by a perceived efficacy discrepancy in success between malignant pleural/peritoneal mesothelioma and other reported cancers. Surely macroeconomics will have played their part. I interpret the market's reaction to this data as quite the undeserved punishment. What I have read confirmed long-lasting success of TRC²'s TRuC-T cells in different solid tumors, with a good safety profile so far, fast T cell migration and good persistence and killing properties of T cells. It is rare to see these qualities combined in an oncology drug candidate.

No further substantial updates have been given over the past year, which may have exacerbated downward price pressure, in what has been named the worst biotech sell-off the markets have ever seen.

TCR² is slated to report the following updates in the coming months; expanded data of the Phase 1 of gavo-cel in solid tumors, an update from the phase 2 of that trial, and the first data of the phase 1 trial for drug candidate TC-510.

This is the stock's price chart over a three-year time-frame.

With an average analyst price target of $14 compared to its actual price of $3,75, there is more than some potential upside here.

Company Profile

The TRuC T cell platform

TCR² Therapeutics engineers T-cells to act against cancer. It is part of a vast array of companies doing so in what is called the field of immunotherapy, building on earlier approvals of Abecma (BMY), Breyanzi, Carvykti ( JNJ ), Kymriah ( NVS ), Tecartus, and Yescarta as autologous CAR-T therapies. All these approvals are for liquid tumors, have a considerably high toxicity profile which often leads to so-called cytokine release syndrome and graft-versus-host disease. The currently approved CAR-T therapies are autologous, which means the T cells originate from the patient's body, are extracted, engineered, and then re-inserted. The field of immunotherapy is looking to find better alternatives to these therapies, by lowering the toxicity profile which should more easily allow for combination therapies, NK-cell based therapies, allogeneic therapies with cells that do not originate from the patient, and therapies in solid tumors. Due to the dense and hypoxic tumor-micro-environment, reducing solid tumors efficaciously seem a hard nut to crack, and durability and sustained killing responses seem persistent issues.

TCR²'s drug candidates are T-cell receptor fusion construct T cells, or TRuC T cells. The furthest-progressed drug candidates, gavo-cel and TC-510, both target mesothelin (MSLN), an antigen expressed on a variety of solid tumors.

This is TCR²'s pipeline, with the first three trials being those of my interest. These are all autologous programs.

TCR² currently has two main drug candidates in play, TC-210 as its lead drug candidate and TC-510. Both target tumors expressing mesothelin, which is expressed in a variety of cancers. Mesothelin is a protein expressed on the surface of tumor cells, which has a role in tumor aggressiveness and therefore also leads to poorer prognosis.

The cancers currently being tested represent an 80,000 annual patient market in the US alone, with most patients in non-small cell lung cancer. TCR² received orphan drug designation for cholangiocarcinoma.

TC-210 or gavo-cel

TC-210, or gavo-cel, is a T cell engineered to target mesothelin (MSLN) without HLA-restriction.

Preclinical results for gavo-cel had been promising, showing much superior tumor clearance compared to MSLN-CAR-T cells, less toxicity than MSLN-CAR-T cells, and prolonged functional persistence. The latter was attributed to increased mitochondrial respiratory reserve and oxidative phosphorylation, which are typical to long-term memory T cells. As persistence is key, the T-cell characteristics a drug developer hopes to find are exactly those.

Gavo-cel is in an ongoing phase 1/2 clinical trial in collaboration with Bristol-Myers Squibb (BMY). The trial started in 2019, enrolling patients with tumors expressing >/= 50% MSLN. The main goals of the trial are to evaluate safety and initial signs of efficacy, and to establish the optimal phase 2 dose (RP2D) in patients with a different set of cancers expressing mesothelin, namely malignant pleural/peritoneal mesothelioma (MPM), ovarian cancer, non-small cell lung cancer (NSCLC) and cholangiocarcinoma. It works with a typical dose-escalation schedule, up to dose level 7, to determine at which point one sees toxicity issues. At each dose, gavo-cel will be tested with or without lymphodepletion.

TC-510

TC-510 is a TRuC that also targets mesothelin, but it engages with PD-L1, which is a receptor expressed in a variety of tumors which prevents cell death. By targeting this receptor, the goal is to induce cell death. Several PD-1 or PD-L1 inhibitors, also called immune checkpoint inhibitors such as Keytruda ( MRK ), Opdivo or Tecentriq ( OTCQX:RHHBY ), have been approved in recent years for several types of solid tumors. To put it in other words, this seems to me like TCR² is trying to integrate an immune checkpoint inhibitor into its TRuC targeting mesothelin.

Preclinical results in tumors expressing the programmed death ligand PD-L1 show pretty remarkable efficacy compared to even to gavo-cel (the yellow line).

The phase 1/2 clinical trial will evaluate safety and first efficacy signals in MPM, ovarian cancer, pancreatic cancer, colorectal cancer and triple negative breast cancer. With 81,000 patients annually in the US alone diagnosed with colorectal cancer expressing mesothelin, this is the biggest additional market.

TC-210 / gavo-cel

Results so far

The focus here will be on what has been reported so far on gavo-cel or TC-210. Most but not all patients that enter this trial are MPM patients, which is logical given 76% of MPM expresses mesothelin and the high specificity of the cancer type. TCR²'s last significant reporting here occurred almost a year ago at this point, but there had been reporting prior to that. With the trial running since 2019, TCR² has already reported on this trial three times before, with September 2021 as not good by the market, looking at the share price drop at that point.

In July 2020 , it had reported an overall response rate (ORR) of 40% according to Recyst v1.1, with two unconfirmed partial responses and a disease control rate of 100%. All evaluable patients showing tumor regression of in between 17-67% decrease in target lesion. A partial response is tumor regression of more than 30%.

In December 2020 , TCR² reported a 38% ORR according to Recyst v1.1 criteria and 50% ORR following lymphodepletion. Three partial responses were reported including an ovarian cancer patient up to the sixth months, all 8 evaluable patients showing tumor regression of a median of 43% (in between 5% and 75%), and a manageable toxicity profile with only two patients showing manageable grade 3 adverse events and no neurotoxicity or on-target, off-tumor toxicity. Of the 8 patients treated, 7 were MPM patients.

In September 2021 , with 17 patients treated and 16 evaluable patients, 12 were diagnosed with MPM, 4 with ovarian cancer and 1 with cholangiocarcinoma. The overall response rate reported was 38% in mesothelial-positive mesothelioma and 31% following Recyst v1.1 criteria. The disease control rate was 81%. There were six patients with partial responses, meaning tumor regression of more than 30%. Only one of 16 patients did not show tumor regression, the other 94% did, with tumor regression ranging in between 5% and 75%. Gavo-cel led to a median overall survival of 11.2 months and median progression free survival of 5.9 months respectively for MPM patients. These patients were heavily pretreated, with a median of 5 lines of prior therapy including earlier immune checkpoint inhibiting therapies (11 patients) and mesothelin-directed therapies. Obviously, as they came into the trial, none of these therapies had been working well so far.

Having dosed patients up to dose level 5, two dose-limiting toxicities had been reported, namely grade 3 pneumonitis and grade 5 bronchoalveolar hemorrhage. This established dose level 5 as the maximum tolerated dosing.

The market's interpretation of the September 2021 results

The nuance to be found in the September 2021 results - it would be a stretch to call it a setback - was that an objective response was present only in MPM patients. An objective response is shown in a patient having either a complete or partial response. Worries, then, could be that gavo-cel would only be able to be used in MPM patients.

As a result, some downward analysts price target revisions have occurred, but at this stage, the current price action is nowhere near the average price target of $14. It remains to be seen whether analysts or the market may have been overly optimistic when the first data came out. For me, there is little difference between reported results, and at this point the market - not the analysts - seems far too pessimistic.

Surely, the biotech bear market was in the early innings as of August 2021, and the September 2021 results may have come at a bad time. I have seen more than one sell-off on positive data over that period.

Furthermore, in December 2021, the company Atara Biotherapeutics ( ATRA ) had reported early promising results on its autologous drug candidate ATA2271, also targeting mesothelioma and other solid tumors, and currently in a voluntarily paused phase 1 trial. Atara had in December 2021 reported promising preclinical and early clinical results with apparent lack of toxicity, which made analysts consider its drug candidate may outperform TCR²'s gavo-cel. Then in February 2022, Atara had to report a fatal serious adverse event and voluntary enrollment pause, after which its partner Bayer (BAYRI) ended its licensing and funding agreement with Atara to develop next-generation mesothelin-directed CAR T-cell therapies.

The upcoming September 2022 catalyst

September 2022 should see an extended data readout of its phase 1 trial with at least 30 patients. This is what TCR² mentioned about that:

As part of our commitment to deliver a meaningfully interpretable dataset, we plan to present our gavo-cel Phase 1 trial data on at least 30 patients in September in order to collect additional scans on patients evaluable for efficacy.

Collaboration with Bristol-Myers Squibb in mesothelioma presenting tumors

TCR² Therapeutics picked up interest from Bristol-Myers Squibb, one of the leading forces in immunotherapy nowadays. On October 25, 2021, it announced a clinical trial collaboration agreement and phase 2 expansion cohorts testing Opdivo (nivolumab) and Yervoy (ipilumab) in patients with mesothelin-expressing solid tumors, either in a single agent cohort, a combination cohort with Opdivo and a combination cohort with Opdivo and Yervoy.

This follows the approval of both Opdivo and Yervoy, both immune checkpoint inhibiting immunotherapies, having been approved for patients with unresectable malignant pleural mesothelioma. As the optimal dose (RP2D) has yet to be established, this trial has not started yet insofar as I am aware. An update should follow in the second half of 2022.

TC-510

There has not been any reporting on TC-510 yet. The phase 1/2 trial started in June 2022. In August, the company stated that initial reporting on this trial was scheduled for the second half of 2022.

We also continue to expect to present initial safety, efficacy and translational data from our TC-510 Phase 1 clinical trial before the end of 2022.

All I can say at this point is the preclinical data looks particularly promising, even in a direct comparison with gavo-cel results, which already says something I believe. The question for me is whether the preclinical level translates well to humans, and if so, how the toxicity profile of this drug candidate will look.

Things happening under the radar

TCR² has a 85,000 square foot manufacturing facility in Maryland, USA, with two clean rooms to manufacture its own drug candidates. It collaborates with ElevateBio in this regard. The manufacturing facility should be capable of producing drugs for several thousand cancer patients per year. I would say building such a site is not the lightest of commitments, and shows the promise TCR² itself sees in its lead drug candidate, and probably those in its pipeline.

TCR² is also working on further expanding its pipeline with both autologous and allogeneic product candidates, with preclinical data having been reported and to be further expected in the course of 2022. 2021 saw TCR² reporting good results on a TRuC expressing IL-15, promoting T cell proliferation and survival. To advance allogeneic drug candidates, TCR² is collaborating with Arbor Biotechnologies .

My take on things

When taking a look at TCR², my stress is on gavo-cel/TC-210 and less on TCR-510. Mesothelin expression on different tumors has made it a target of oncology drug candidates, with no clear successes so far. TCR²'s phase 1/2 trial with gavo-cel only enrolls patients expression more than 50% mesothelin. All of these tumors, pleural mesothelioma, ovarian, colorectal cancer or cholangiocarcinoma, are solid and have a high mortality rate. With patients often relapsing, large successes have been elusive.

Patients in any trial, but particularly a phase 1 trial, are hard to treat and are likely to eventually relapse and pass away. One is, in a phase 1 trial, trying to help patients who did not have realistic treatment options left any more. As such, one cannot expect a miracle cure.

From that perspective, taking into account that patients on trial have already failed a median of 5 prior lines of therapy, I believe gavo-cel's results are good. The possibility of gavo-cel monotherapy may create interest by big pharma. Bristol-Myers Squibb is already combining efforts, as gavo-cel will be tested with its immune checkpoint inhibitors Opdivo and Yervoy.

As a standalone therapy in patients after 5 prior lines of therapy, gavo-cel seems to generate tumor regression in 94% of patients, and prolongs their lifetime considerably. Outperformance of existing therapy is one aspect, gavo-cel also seems to solve several issues current therapies are facing, such as toxicity and durability. Pretty impressive median overall survival and median progression free survival so far have been reported. Again, in solid tumors, immunotherapy cancer therapy success is scarce, so any success and life prolongation compared to existing therapy, without toxicity risks, is worthy of investment consideration here.

As for TC-510, I would assume that efficacy will be even higher than gavo-cel, even though the jury is still out on that. My question is whether, if killing is so effective, toxicity can be managed with this drug candidate.

Total incidence of mesothelin-expressing cancers is about 81,000 patients, which allows for a large enough addressable market.

Though I believe it would be a stretch to call it a setback, the nuance of September 2021 was that an objective response, i.e. the number of patients having either a complete or partial response, was shown only in MPM patients. One could then worry that gavo-cel would only be able to be used in MPM patients. I would think different at this stage, given the possibility of monotherapy as well as combination therapy, the clear tumor regression in monotherapy, and the manageable safety profile. The company states that it is the first company to demonstrate a RECIST clinical response with a cell therapy as a single agent.

For all of the above, and in light of macro-economic worries which had been on the rise since August 2021, I believe the market has overreacted in September 2021 and the period thereafter. Though some slight analyst price target revisions have been made, analysts share that view, maintaining an average price target well above the current price. At this point the market seems far too pessimistic.

The ongoing work on its manufacturing facility as well as collaboration with Bristol-Myers Squibb show both TCR²'s resolve and belief in its results, and the interest of peers.

Upcoming catalysts

To summarize, the upcoming catalysts are the following.

- TCR² will present expanded phase 1 data in September 2022 - I assume this will be at ESMO 2022;

- TCR² will report on the phase 2 portion of the phase 1/2 trial for gavo-cel in the second half of the year;

- TCR² will report initial data on TC-510 - I assume this will be towards the end of the year;

Ownership, short interest, volume and float

Institutional ownership stands at 71.36% at this time. Insiders hold 0.89% of all outstanding shares. Short interest is at 8.20%.

The float is 26 million. Average volume is around 400,000 shares.

The company regularly hands out stock options to its employees, exercisable at the stock price of the stock option grant. The latest reported were on August 1, 2022 , July 1, 2022 , June 1, 2022 and May 2, 2022 .

Financials

The company had $206 million cash and cash equivalents in hand at the end of the second quarter of 2022. The last time it picked up cash was in January 2021, when it did a public offering of 4,590,164 shares at $30.50 per share.

Net cash used in operations was $19.5 million for the second quarter of 2022 compared to $15.0 million for the second quarter of 2021. TCR2 projects net cash use of $115-125 million for 2022 . It expects cash on hand to support operations into 2024.

Risks

TCR²'s pipeline in part concerns drug candidates in phase 1 trials as well as even more early stage drug candidates. The further a drug candidate, progresses, the more it will approach the end-stage of approval and sales. As long as that stage hasn't come yet, the road is paved with uncertainty and volatility. This is not different with TCR², as one can see from its price over the past years. Risks may come from regulatory uncertainty or competition that reports more compelling results.

As mentioned above, Atara Biotherapeutics reported a voluntary pause for its mesothelin-targeting drug candidate in a phase 1 trial. If TCR², with gavo-cel as its lead drug candidate, were to report such a trial hold, or a voluntary pause due to a fatal adverse event, one can almost be sure that prolonged negative pressure on the share price seems inevitable. Harpoon Therapeutics' ( HARP ) HP536 is another competing drug which showed target engagement. HP536 is not Harpoon Therapeutics' main focus, and the company is now looking to partner to further dose optimization in mono- and combination therapy settings. I have no further knowledge of any trial targeting mesothelin-expressing tumors with a single agent therapy.

Conclusion

TCR²'s share price does not seem to correlate with the results it has reported so far for its drug candidate gavo-cel/TC-210. The market has been without news on this drug candidate for almost a year now. I believe the upcoming reporting in September 2022 may be an inflection point. There are two further catalysts coming up in the second half of 2022.

Though successful targeting of solid tumors with a manageable safety profile is not easy, gavo-cel/TC-210 seems capable of doing so. Gavo-cel's results so far are best in malignant pleural/peritoneal mesothelioma. A tumor regression in 94% of evaluable patients in at least three tumor types at this point, combined with single-agent therapy potential do seem characteristics worthy of a long-term investment in my eyes. I explained above why one needs to have realistic expectations with regards to the upcoming readout, knowing also the median of 5 previous lines of therapy patients on the current trial have already had, and the fact that eventually, these patients often relapse.

If preclinical results would translate well to human, TCR²'s second drug candidate TC-510 may show even greater efficacy. If so, the question is how the toxicity profile would look like.

TCR² has furthermore partnered with Bristol-Myers Squibb to testing gavo-cel in combination with two of its immune checkpoint inhibitors, Opdivo and Yervoy. TCR²'s main competitor in the autologous mesothelin-targeting space has a trial which is currently on pause, and has lost Bayer as its partner.

TCR²'s large manufacturing facility, capable of producing drugs for thousands of patients annually, show its resolve and belief in the future.

All of the above make me rate this stock a strong buy.

For further details see:

TCR² Therapeutics: Betting On A Solid Reversal