2023-09-21 03:33:19 ET
Summary
- C4 Therapeutics is a biotech company working on novel cancer treatments, but it is still in early stages and not recommended for investment.
- Their pipeline includes protein degraders for multiple myeloma, lymphomas, synovial sarcoma, and EGFR mutations in lung cancer.
- The company's financials show a cash burn rate, and they have between 6 and 7 quarters of cash on hand. The success of their approach is still uncertain.
Topline Summary
C4 Therapeutics ( CCCC ) is a microcap biotech working on novel treatments for cancers of different types. Their main projects include protein degraders, which have an established place in the standard of care of multiple myeloma and certain forms of lymphoma. However, everything is still so early days with this company that buying in right now is going to most likely be a painful waiting period punctuated with potential volatility. I don't like to count on this volatility to make gains, so at this time this equity is not one that can be recommended, but it will be worth watching as the pipeline develops.
Pipeline Overview
CFT7455
The most advanced product CCCC is developing is CFT7455, a degrader of IKZF1 and IKZF3, for the treatment of multiple myeloma and non-Hodgkin's lymphomas. These targets are shared by approved blockbusters like lenalidomide and pomalidomide.
CCCC presented early-stage clinical trial findings at AACR 2022 , which demonstrated concerning rates of high-grade neutropenia (reduction in a specific form of white blood cells called neutrophils). However, there was preliminary evidence that CFT7455 could impact on serum markers of myeloma. The study is ongoing with alternate dosing regimens due to the unexpected pharmacodynamics observed in the study.
CFT8634
This molecule is a degrader of BRD9, a molecule understood to be important for growth of tumors deficient in SMARCB1 . In particular, synovial sarcoma becomes dependent on BRD9 activity due to an oncogenic gene fusion. Blocking BRD9 has substantial activity in preclinical models of SS18-SSX1 and SS18-SSX2 fusion-positive synovial sarcoma.
These preclinical findings have led both to Orphan Drug designation and the initiation of a phase 1/2 clinical trial, the design of which was described last June . This study is ongoing, but no results have been announced to date.
CFT1946
CFT1946 is a selective degrader of mutated BRAF protein, a marker that is highly relevant in cancers like melanoma and colorectal cancer. There is also a tissue-agnostic approval (outside of colorectal cancer) for dabrafenib plus trametinib in patients with the V600E mutation of BRAF .
CCCC has opted to develop a degrader of BRAF with the hope of avoiding paradoxical activation of RAF dimers in tumor cells harboring V600 mutations, which might give the compound meaningful single-agent activity that we don't currently see with approved RAF inhibitors (they're almost all approved only in combination with a MEK inhibitor).
The company presented preclinical developmental findings for CFT1946 at AACR 2023 , showing selective inactivation of mutant, but not normal, BRAF protein in cells, with antitumor activity demonstrated in mouse xenograft models. A phase 1 dose escalation trial is ongoing for this agent.
CFT8919
CFT8919 is an EGFR inhibitor targeting the L858R mutation, one of the main "classical" mutations that can sensitize lung cancer cells to treatment with drugs like osimertinib. It was shown to have in vitro activity against resistance-driving mutations, as well , most notably the T790M gatekeeper mutation. CCCC hopes that the observed difference in progression-free survival between patients with L858R and exon 19 deletion will translate into a niche for CFT8919. In my experience, clinicians are not currently recognizing a substantial difference as "real" in practice, and it is not discussed as a critical unmet need. So we'll have to see how this develops.
In June 2023, CCCC announced a licensing agreement for CFT8919 with Betta Pharmaceuticals, for development in China and other Asian countries. This is an important step, since EGFR mutations are more prevalent in Chinese patients with lung cancer, driving greater interest for development of novel EGFR inhibitors. The company also announced that their IND was cleared to begin first-in-human studies for this agent.
Financial Overview
At the end of Q2 2023, CCCC held $44.9 million in cash and equivalents, with another $222.4 million in marketable securities. Total current assets reached $274.4 million. Their net loss after collaboration revenue and interest was $35.9 million for the quarter, up from $27.4 million the same time in 2022.
At this cash burn rate, assuming steady losses and no growth in collaboration revenue, CCCC has between 6 and 7 quarters of cash on hand from the end of Q2 2023, more or less consistent with company guidance that they feel they can fund operations into the second half of 2025.
Strengths and Risks
CCCC presents an interesting picture. At first glance, it looks like they're developing nothing but a bunch of "also-ran" molecules targeting proteins that have been established and have multiple approvals. However, their approach differs in that they have "degraders" of these molecules, with the possibility of a highly differentiated mechanism of action making a meaningful difference in how these tumors might be managed, especially in the relapsed/refractory disease settings.
Unfortunately, the strongest early signals we've gotten so far for this approach are toxicity, and unexpected PK/PD. This points to ongoing challenges for clinical development of these novel molecules, and one will need to watch the updates CCCC is guiding for the second half of 2023 for more information. What we do not have yet is a clear signal that this approach makes a difference in patient outcomes.
And unfortunately it may take all the way until they're running out of cash to know what's up. If it's positive news, then CCCC will likely need to leverage good findings for an equity raise, and that could offset any gains you make on early adoption of the stock.
And if any news is negative, then it will throw into question the entire premise of this company, and investor confidence, which is currently not high, will continue to degrade.
Bottom-Line Summary
For now, CCCC remains too early a project to make a clear recommendation. Absolutely they have an interesting pipeline exploiting well-established targets, but it's not clear that their approach is going to make an impact. If you buy in today, then you're likely in for a long, painful wait for good news that may never come. I personally would watch for other signs of life before becoming a believer in this tech. Therefore, right now my sentiment is "sell," with the intention to watch for future developments.
For further details see:
C4 Therapeutics: Way Too Long A Wait For This One