2023-12-11 08:00:00 ET
Summary
- G1 Therapeutics' lead drug trilaciclib experienced setbacks, but recent presentations on its potential benefits in breast cancer have sparked interest in the stock.
- Trilaciclib is designed to protect normal cells during chemotherapy and has been approved for small cell lung cancer.
- The company's financials show a cash runway that may not be sufficient, but positive data readouts in Q1 2024 could lead to a major recovery.
Topline Summary
G1 Therapeutics ( GTHX ) is being met with yawns by the market overall, with its lead drug trilaciclib experiencing a dramatic setback earlier in 2023 driving out almost all interest from the market. Recent presentation at the breast cancer meeting has stoked some fire in the stock price, but the real catalysts are set to be reported in 1H 2024. This makes right now a very interesting opportunity, one very much worth considering on a speculative basis, provided you respect the risks. It was a company I was bullish on back in 2021, and I remain optimistic about their prospects.
Pipeline Overview
Trilaciclib
The main product that GTHX has in its pocket is trilaciclib, an inhibitor of cyclin dependent kinases 4 and 6 that is designed to stall out division of normal cells that normally divide rapidly, such as those of the bone marrow. By providing this braking for the body's cells, subsequent chemotherapy can have less of an impact on the body's immune system and blood cell production while continuing without substantially affecting anticancer activity. This has been dubbed "myeloprotection," and trilaciclib has been approved since 2021 as a preventative supportive care measure for patients with small cell lung cancer.
Use of trilaciclib in small cell lung cancer has experienced a slow uptake, not helped by the fact that small cell is an uncommon form of lung cancer. However, recent news like the fact that trilaciclib has been included in the ASCO guidelines provides a signal of the favor that myeloprotection is gaining. This coupled with an ongoing effort to showcase the potential benefit of myeloprotection in the real world helps to explain the steady gains GTHX is making in the marketplace.
However, expansion of the indication is the surest and fastest route to rapidly increasing the market presence of trilaciclib. This should be a shoo-in kind of strategy, since "myelosuppressive" chemotherapy is used widely in a various forms of cancer, both common and uncommon. Unfortunately, research in other areas has been mixed.
The most notable setback faced by GTHX was the decision to terminate the PRESERVE 1 trial , which was evaluating trilaciclib in patients receiving triplet chemotherapy for metastatic colorectal cancer. The placebo arm of the trial apparently had improved response rates compared with the trilaciclib arm. This is near-catastrophic news, since the very last thing you want a supportive care drug to do is reduce the efficacy of the main chemotherapy regimen you're using. On the plus side, the main endpoint of neutropenia was improved with trilaciclib.
So not quite at the catastrophe level. The drug did what it was intended to do, but in this particular regimen, it was at the expense of treatment efficacy. Unacceptable, but with potential upside.
Their next main shot on goal is in breast cancer, which uses different chemotherapeutic regimens. They've provided a key update at this year's SABCS meeting , showing that pre-treatment with trilaciclib was correlated with long-term survival with subsequent anticancer therapies in patients with triple-negative breast cancer. This is a taster for the upcoming interim overall survival readout of the phase 3 PRESERVE 2 trial, which is assessing trilaciclib in patients with triple-negative breast cancer, anticipated in Q1 2024.
Initial overall survival findings from a phase 2 study combining trilaciclib and sacituzumab govitecan are also anticipated in Q1 2024.
Financial Overview
Per their Q3 2023 quarterly filing , GTHX held $126.1 million in total current assets, including $52.6 million in cash and equivalents and $41.7 million in marketable securities. Revenues for the quarter were $12.3 million, down from the same time in 2022 due to reduced licensing revenue. Net product sales increased 32% year over year to $10.8 million.
GTHX has also worked to reduce expenses, which reached $28.7 million for the quarter, down from $45.1 million in Q3 2022. Adding in interest expense and income, the net loss for the quarter was $18.2 million. This means that the company has between 5 and 6 quarters of cash/securities on hand to fund operations at these levels, assuming no growth of revenues or operating losses. Consistent with this, GTHX guided in their operating highlights that this would be sufficient cash to fund operations beyond Q3 2024.
Strengths and Risks
Even after the share price recovery on SABCS data news, GTHX is sitting near all-time lows, with cash runway shrinking a bit too quickly for comfort. And the colorectal cancer news from earlier this year is going to be a black cloud for years to come, I fear. There will always be the chance for a "surprise" negative data readout, no matter what else the company has shown.
That said, we're getting strong early signals that trilaciclib is improving outcomes in patients with breast cancer, and we're getting right up to phase 3 readouts. If these findings are positive, I'd expect a major recovery. If they're negative, then you can expect an ongoing decline to oblivion. So if you're interested, you have to be buying into the early signals that patients with breast cancer are doing better.
But if they are, this is a much, much bigger potential market than small cell lung cancer, and it would vault GTHX into valuation not seen for years.
Bottom Line Summary
GTHX has almost every hallmark of a company being undervalued. Approved drug, revenues, promising expansion of their drug's reach. Their cash is a bit of a concern, and I expect if they have really good news in Q1 2024 that they'll couple that with a substantial equity raise. All that said, they're entering a crucial point, and with catalysts coming soon and the market continuing to give this company a suppressed value, I think they're worth a solid look. My sentiment is buy or strong buy based on what we see from data readouts come next year. But if any of them are positive, it's not hard to imagine $10-$16 a share.
For further details see:
G1 Therapeutics: Flying Low, Too Low