2023-05-14 09:14:44 ET
Summary
- Kymera produced solid-looking phase 1 data, but Pfizer's problems in the space, along with some safety issues, hurt its stock.
- When partner Sanofi produces phase 2 data, this company will be considerably derisked, assuming the data is clearly positive.
- The problem is, Sanofi is not telling us when in 2023 they plan to start the trial.
Kymera ( KYMR ), along with Arvinas ( ARVN ), is a leader in the targeted protein degradation space. It has major collaborations with Sanofi (SNY) and Vertex (VRTX). I have covered Kymera multiple times before. For a discussion of the science of protein degradation, see this article . In my previous article, from January, we saw Kymera's lead asset KT-474 announcing HS/AD (hidradenitis suppurativa/atopic dermatitis) data that de-risked the IRAK4 protein degradation platform.
The data were from Part C of the phase 1 clinical trial, designed to check whether the PK/PD seen in healthy volunteers translates to patients with HS/AD. These HS/AD patients had baseline IRAK4 twice as much as healthy volunteers. They were given a dose that was also lower than the one given to healthy volunteers - although in the fed state, as opposed to a fasting state. Even so, the drug was able to knock down IRAK4 up to 90% in both HS and AD patients at the same level as was seen in healthy volunteers.
In that earlier article, I compared this data with other known and approved agents. In AD, a large, $10bn market, two approved drugs are Pfizer's abrocitinib and Sanofi's dupixent. In two clinical metrics, pruritus reduction and eczema reduction, KT-474 did numerically better than both drugs. In HS, where Humira is the only approved drug, data for KT-474 were again numerically superior in scores like HiSCR (Hidradenitis Suppurativa Clinical Response). Kymera had "modest and non-adverse" QTcF prolongations in certain patients.
One problem faced by Kymera in HS is that last year, Pfizer's own HS drug, PF-06650833, which is an IRAK4 inhibitor, came out with very poor data in the indication. A late-breaking abstract at the EADV congress showed that the molecule scored a placebo-adjusted HiSCR score of only 0.7%, where Humira's score is 31.0%. However, as we saw earlier, Kymera's score, despite its molecule having a similar mechanism of action, was outstanding, showing a score of 42% and 25% for all 12 patients for HiSCR50 and HiSCR75 respectively, and a score of 50% and 30% for the 10 moderate to severe patients for HiSCR50 and HiSCR75 respectively. The score was, thus, not only better than Pfizer's, it was even better than Humira's, which has a different mechanism of action. However, that the stock has not taken off as much as it could have is possibly due to lingering doubts about the IRAK4 degradation platform, a doubt created by Pfizer's space defining failure, and a doubt that can only be resolved if Kymera is able to produce equally outstanding phase 2 data.
On this data, Sanofi decided to start a phase 2 trial this year. However, in its last earnings call, the company failed to provide a definite timeline for the start of the trial, leading to a drop in the stock's price. The company's high cash burn was also a major downer.
Sanofi is supposed to be starting a phase 2 trial only in HS in 2023. In their earnings call, in response to questions, management did not provide a date, but only said this:
There is limited additional information I can share with you at this time other than to say the plans in place for starting Phase II are tracking with Sanofi's and our expectations.
There are certain things management never shares, just buyout offers, or CRL details. There are certain things management does not share only when they do not know details of those, or they foresee an adverse effect on the stock (and they are not legally bound to share it). I am not sure in which category this non-sharing of a clinical trial initiation date falls into. I am guessing the market is as confused as I am.
Financials
KYMR has a market cap of $1.55bn and a cash reserve of $516mn. Research and development expenses were $42.2 million for the first quarter of 2023 while general and administrative expenses were $12.6 million. That is a very large $55mn cash burn per quarter, giving them a cash reserve of 8-9 quarters, or until 2025. The large R&D expense is surprising, given that Kymera is only in phase 1 clinical stage for three of its assets - KT-253 for myeloid malignancies, KT-413 for B cell NHL, and KT-333 for various leukemias, lymphomas and solid tumors. These are very small trials and should not be costing more than a few millions each, total. Their KT-474 trial is completed, and Sanofi is taking over, so they are not spending anything there. Stock based R&D related compensation was $4.7mn, but these clinical programs as well as the discovery program does not quite add up to and explain the humongous R&D expenses. Even their G&A expenses are a bit on the higher side.
The company is heavily institution and smart money owned, and there's low retail presence. Atlas Ventures is the largest owner with a 20% stake. Insiders are generally sellers in the last two years, except BVF, which has regularly bought stock.
Bottom Line
My opinion of KYMR remains unchanged. This is interesting science, and there are early signs of efficacy. However, given the Pfizer problems, the small size of the trial, the QT prolongations (the company does say it is not a class effect) - and the high cash burn - I will watch this from the sidelines.
For further details see:
Kymera: More Data Needed