HOWL - Werewolf Therapeutics: Possibly A Transformative IL-2 But Still Early Days

2023-11-06 17:14:34 ET

Summary

• Werewolf Therapeutics is developing a "conditionally activated" interleukin-2 (IL-2) drug for the treatment of stage IV melanoma and metastatic cancers.
• The drug aims to deliver therapeutic doses of IL-2 selectively near the tumor, minimizing toxicity.
• Early data from phase 1 trials showed remarkable tolerability and PK/PD, as well as the faintest signals of efficacy.

Topline Summary

Werewolf Therapeutics, Inc. ( HOWL ) definitely has a sense of flair with its naming convention and (apparently) timing of announcements. This early-stage biotech is working on a sort of morphing form of a cytokine that's been in use for decades, though with limited success due in no small part to toxicity. We will see some early data here, but at this point, the staging of the company continues to be a big risk.

Pipeline Overview

WTX-124

The main drug currently in HOWL's pipeline is a "conditionally activated" interleukin-2 (IL-2) designed to induce the classic increase in immune activation, but designed with the hope of being selectively active only near the tumor.

Why? IL-2 was first approved 25 years ago for the treatment of stage IV melanoma, and it was first shown in the 80s to generate a therapeutic effect in metastatic cancers. It has also been used in other tumor types that have been classically non-responsive to chemotherapy. Until the emergence of immune checkpoint inhibitors, high dose IL-2 was just about the only treatment option that could provide a long-lasting benefit, providing one of the first important clinical clues about the benefit of targeting cancer through the immune system.

But the downsides are immense. The massive doses of IL-2 required to achieve any anticancer efficacy basically guarantees a slew of significant toxicities, including profound rigors, fevers, pain, fluid retention, and even a complication called capillary leak syndrome that can be fatal. I have had nursing colleagues describe the toxicities associated with high-dose IL-2 as some of the more frightening that they saw in advanced cancer.

So we have an effective therapy approach here that is distinct from the immune checkpoint inhibitors that are in wide use today. But the toxicity is a big problem. HOWL hopes that their INDUKINE platform can be used to deliver therapeutic doses more effectively. Basically, the IL-2 molecule is coupled to domains that help to keep the protein from being degraded in the blood, as well as keep the IL-2 from binding its receptor on immune cells.

Once near the tumor, overexpression of proteases in the tumor microenvironment leads to cleaving away of these domains, essentially dosing IL-2 only around the immune cells in the tumor.

To date, WTX-124 has only moved into phase 1 trials. We got a first look at this study's findings at this year's SITC 2023 meeting, a conference focused on immunotherapy developments in cancer.

You can find the full poster from the company here . So far, the company has assessed 4 increasing doses of WTX-124 in patients both along and in combination with pembrolizumab (although this report only included the patients given WTX-124 alone). Most patients enrolled in the study had melanoma, with heavily pretreated disease, and over half of these patients also had developed some kind of immune-related adverse event in prior therapy.

Among the 16 patients treated so far, none has developed any adverse event higher than grade 2, although a wide variety of different adverse events were reported overall. No patients had an adverse event requiring hospitalization, and none had to stop therapy due to toxicity at the time of the readout. HOWL also highlighted that there were no instances of vascular leak with WTX-124.

Of course, aside from safety, phase 1 studies also report the pharmacokinetics and pharmacodynamics of the molecules. I don't usually bother too much with this information, since it doesn't give much of a signal on whether the overall program has any hope for success in the long run. Or at least if the PK/PD were grossly poor, then the drug simply wouldn't continue past phase 1, and we wouldn't be talking about it.

However, since the original IL-2 approach required high doses, it is worth looking at what HOWL was able to achieve. They measured the PK of the first dose of WTX-124 and followed the amount of drug in the body for 2 weeks. Notably, the amount of IL-2 in the system was hundreds of times less than what would be seen with high-dose IL-2, suggesting that the platform is doing its job of minimizing the overall exposure of the cytokine, at least in this preliminary dataset.

However, when given at the highest dose, the maximal concentration of WTX-124 was near that of high-dose IL-2, suggesting that the favorable tolerability they saw with the drug wasn't because they were completely underdosing it and comparing apples to oranges. There appears to be a similar concentration of "potential" IL-2 in the blood as what you would see with high-dose IL-2, but without the terrible side effects.

There were a few patients achieving stable disease, as well as one patient who had an objective response at the highest dose of WTX-124. There's not much we can say about those findings, of course, but it's definitely not a bad place to start from.

Other pipeline projects

HOWL has not presented any other clinical findings to date; however, they have other important projects in the pipeline. These include WTX-330, which entered phase 1 study earlier this year. This is a modified version of IL-12, which has similar theoretical potential as IL-2 but has not yet been successfully exploited for treatment of cancer.

The company is also co-developing an alpha-interferon INDUKINE molecule with Jazz in a deal that was struck in 2022. An IND to begin phase 1 study of this molecule was approved in July 2023.

Financial Overview

As of their Q2 SEC filing, HOWL held $137.5 million in cash and equivalents, with total current assets reaching $147.4 million. Their total operating expenses were $14.1 million, down from the same time period in 2022, and collaboration revenue of $8 million brought the operating loss down to only $6.1 million for the quarter.

After interest income and other expenses, the net loss for the quarter was $5 million. At this current burn rate, HOWL has cash on hand to fund activities for between 6 and 7 more years, although inevitable growth in expenses is going to eat into that runway, and I would consider this projection unreliable.

Strengths and Risks

As with any company like this, the first and highest risk that you should acknowledge is that the science is still really early in its life, and we're looking at a wait of many years before even the possibility of getting it to market. While the roller coaster ride can take the company's valuation up and down in that time, they will not be commercialized any time soon.

And, as a phase 1 company, the odds are not in their favor. The vast majority of drugs in phase 1 fail to reach approval. So don't underestimate the risk of investing in a company that's only this far along.

All that said, HOWL's financial positioning means that they should be pretty safe from any further significant dilution of share price for the near term. I'd say that they're on solid financial ground for at least 2 years as costs continue to ramp up. They also now have an established pedigree of hammering out deals with big pharma companies, as evidenced by the Jazz collaboration.

Furthermore, their science has a really solid foundation in clinical cancer research. We know that IL-2 works, so HOWL could have a very important immunotherapy on their hands if the tolerability bears out, and if it can be shown to have similar activity to what we know high-dose IL-2 can do.

Bottom Line Summary

Every biotech is risky. HOWL for me is a speculative buy, but that's only for the trader interested in trying to adopt early and take gains where they can. For the conservative investor, I would give it a solid hold rating. HOWL is worth watching to see how these projects develop. After disclosing their SITC data, the stock jumped more than 50% to a market cap of somewhere around $100 million. There's a LOT of upsides here for the risk-tolerant.

However, for the risk-averse, there's also every chance that HOWL flames out early. So for the general investor, I'd sit and wait. For those looking to find a good trading opportunity at the ground floor, HOWL is about as much of that as you can get.

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