2024-01-03 02:39:07 ET
Summary
- NCNA is a beaten-down stock for numerous reasons, including failure of its prior lead candidate (Acelarin) in two phase 3 trials, as well as a limited cash runway.
- However, there are good reasons to believe that NCNA's current lead candidate, NUC-3373, will be successful. NUC-3373 aims to replace 5-fluorouracil (5FU) by overcoming its numerous limitations.
- Notably, 5FU is still used in a variety of malignancies. Importantly, 5FU-based chemotherapy regimens remain the cornerstone for treatment of colorectal cancer.
- A positive readout from an ongoing RCT in 2nd-line colorectal cancer (expected in 2024) could be the start of a major turnaround for NCNA.
Thesis overview
NuCana (NCNA) is a UK-based biotech developing nucleotide molecules for various oncology indications. Its platform, called ProTide, has major advantages over traditional nucleoside analogues currently used as part of chemotherapy regimens. NCNA's lead candidate is NUC-3373 (ProTide 5-fluorouracil). NCNA aims to replace traditional 5-fluoroucil (5FU) which is still being used as part of chemotherapy regimens for numerous malignancies. Importantly, 5FU is still used as part of the backbone chemotherapy regimens for 1st-line (1L) and 2nd-line colorectal cancer (2L-CRC). Preliminary ph1/2 results suggest not only promising activity but also better safety and tolerability. An ongoing randomized controlled trial (RCT) in 2L-CRC is recruiting well, with complete enrolment expected within the coming months and a readout likely in 2024. A positive readout, which in my opinion is highly likely, should result in significant upside and open opportunities for funding/partnerships. Although my thesis is based on this binary catalyst, there are multiple additional readouts from ongoing ph1/2 trials expected in 2024.
The main risk to the thesis is an underwhelming readout in above-mentioned RCT. Additional risks include need to raise cash sometime in 2024, as well as risk of reverse split by May 2024.
Why is the stock down?
At the time of writing NCNA is trading at a 90% discount compared to March 2022. There are several reasons for the downward trend since then;
- In March 2022 NCNA announced discontinuation of a phase 3 study of its then lead candidate, NUC-1031 (ProTide gemcitabine), after an interim futility analysis. Notably, NUC-1031 treatment arm did worse (lower survival) than the control arm. Before that, NUC-1031 had failed another phase 3, in pancreatic cancer (although failure was attributed to unfavorable baseline imbalances in patient characteristics, and positive survival trends were observed in selected patient sub-groups). These failures were major hits for NCNA putting into question the whole oncology ProTide platform. Failure of NUC-1031 and implications for the rest of the pipeline will be discussed in the next section. Notably, NCNA was trading at $2.9 before discontinuing the ph3 in biliary tract cancers, and at around $7 before failure of the ph3 in pancreatic cancer.
- Multiple readouts from ongoing ph1/2 studies were eagerly expected by investors during 2024. However, readouts apparently did not meet investors' expectations (to be discussed in more detail in a subsequent section). Importantly, investors were probably expecting an interim readout from ongoing phase 2 RCT in 2L CRC in 2023 . However, instead of that we got an abstract describing the study design, with no efficacy data. The only new info was that the "study is recruiting well and aggregated safety data from the first 40 patients enrolled showed no new safety signals".
- NCNA guides a cash runway to 2025. Therefore, a lot more cash will be needed to advance pipeline to later-stage clinical trials, which without a partnership would be severely dilutive considering current market cap ($15.6M at the time of writing). Notably, the guided runway is dependent on factors that are beyond NCNA's control (to be discussed in the "Financials" section).
- Risk of de-listing or reverse split by May 2024. NCNA first received delisting notice in May 2023. In November 2023 NCNA announced listing transfer to Nasdaq Capital Market and an additional 180-day period (i.e up to May 6, 2024) to regain compliance (bid price>$1).
- During early 2023 stock was trading at $1.5-1.6 due to hopes of winning a patent litigation in UK and Germany against Gilead for products containing antiviral sofosbuvir (check coverages from E. Roudasev for more details on this). However, Gilead won, despite a prior favorable decision in Germany. Following negative decisions (by the Patents Court of the High Court of Justice of England and Wales, and by EPO Technical Board of Appeal) that invalidated the relevant patents, NCNA has decided "to abandon further proceedings in Germany" and became "liable to pay a proportion of Gilead’s legal fees" for legal proceedings in UK and Germany. "All obligations arising from the patent infringement litigation in the U.K. and Germany have been settled as of September 30, 2023."
Overview of ProTide platform
Nucleoside analogues are still widely used as part of chemotherapy regimens but have major limitations;
- Rapid breakdown results in short half-life, which necessitates challenging administration schedules (e.g. 5FU is often administered as a 46-hour continuous infusion). Furthermore, breakdown into toxic metabolites (as is the case for 5FU) is responsible for many of the observed adverse effects ((AEs)).
- Their uptake by cells requires active transport. This, in combination with rapid breakdown, results in poor intracellular concentration (where the drug works), especially when the necessary transporters are not expressed at sufficient level by tumor cells.
- Nucleoside analogues need to be converted intracellularly to the active substances through a complex metabolic pathway. Expression of the necessary enzymes vary from person to person and may be low in cancer cells, thus resulting in unpredictable (and often insufficient) activation to the active metabolite. Additionally, this process results in generation of toxic metabolites.
ProTide technology avoids above limitations, resulting in nucleotide analogues that are protected from breakdown, can better penetrate cells (no need for active transport) and are not dependent on complex intracellular enzymatic activation. As a result, higher intracellular concentration of the active metabolite can be achieved (which may translate to better efficacy), while at same time avoiding generation of toxic metabolites (which may translate to better safety/tolerability profile). Moreover, better pharmacokinetic characteristics allow easier administration schedules (e.g. 2h infusion for NUC-3373 vs 46h infusion for traditional 5FU).
Limitations of traditional nucleoside analogues and advantages of the ProTide platform are summarized in the image below;
Following failure of NUC-1031 (ProTide gemcitabine), the current lead ProTide candidate is NUC-3373 (ProTide 5FU). Furthermore, NCNA is developing NUC-7738 (ProTide 3'-deoxyadenosine), which however is still in early stages of clinical development.
Review of NUC-1031 failure and implications
As discussed above, NUC-1031 (Acelarin), NCNA's prior lead candidate, has failed two phase 3 trials (in biliary tract cancer and in pancreatic cancer), despite promising earlier stage data. A summary of clinical trial results of NUC-1031 (including in other indications) can be found in the latest annual report . NUC-1031 is not the reason why I am invested in NCNA, however for many it has been a major reason to pass on an investment. In the discussion below I will explain why failure of NUC-1031 is not predictive of failure of NUC-3373.
To summarize what will be discussed in more detail below, although failure of Acelarin in two phase 3 trials is concerning about the ProTide platform, NUC-3373 is a different molecule, being developed for a different indication ((CRC)), with better safety/tolerability profile compared to Acelarin and promising efficacy signals (to be discussed in a subsequent section) in clinical trials. Furthermore, failure of Acelarin in biliary tract cancer has been impacted by a high early discontinuation rate and pitfalls in the protocol (treatment cessation instead of re-challenge at a lower dose). Such problems do not apply to NUC-3373 based on so far available data. Therefore, there is little reason to believe that NUC-1031 failure is predictive of NUC-3373 failure. On the contrary, there are valid reasons (to be discussed in subsequent sections) to expect a successful clinical development of NUC-3373.
If you have limited time just skip next paragraphs and move directly to the next section.
Acelarin was advanced straight to a phase 3 trial in biliary tract cancer following a phase 1b study. The phase 1b was an open-label, single-arm, dose?escalation study that enrolled n=21 patients with first-line (1L) advanced biliary tract cancer. Treatment was reported as "well tolerated". However, at the dose used in the subsequent phase 3 trial (NuTide:121), Grade 3 AEs ?-GT elevation was noted in 67% of the patients. Furthermore, 9 of 21 patients (43%) discontinued the treatment due to adverse events. As will be discussed below, NUC-3373 has a much better safety profile. I am emphasizing this because failure of Acelarin has been impacted by a high early discontinuation rate due to AEs, an issue that does not apply to NUC-3373.
To my knowledge results of the phase 3 trial have only been published in the form of an abstract . So detailed results are not available. Based on available data NUC-1031 treated patients had a higher objective response rate (18.7% vs 12.4%). However, median overall survival (9.2 vs 12.6 months) and PFS (4.9 vs 6.4 months) were lower. Therefore, not only did NUC-1031 fail to beat standard of care, but even performed worse.
Grade ? 3 AEs were similar between the 2 groups with the exception of: "liver-related events [increased ALT (17.8% vs 3.4%) and AST (9.1% vs 2.4%), both higher in NUC-1031+cis], hepatobiliary disorders [cholangitis (3.4% vs 1.6%) and biliary obstruction (1.8% vs 0.3%), both higher in NUC-1031+cis]; and haematological [anaemia (9.4% vs 18.0%) and neutropenia (14.1% vs 24.1%), both higher in GemCis]." More detailed data are not available, but one could hypothesize that the higher rate of hepatobiliary AEs may be associated with stronger tumor responses (= potentially stronger local inflammation damaging liver tissue, considering that 54% of patients had intra-hepatic tumors). Notably, despite similar Grade ? 3 AEs comparing the 2 arms, discontinuation rate due to AEs was much higher in the NUC-1031 arm (30 vs 16%), resulting in significantly lower treatment exposure ("median number of cycles delivered of four vs six in the control arm"). Additionally, early discontinuation (within 30 days) was more common in NUC-1031 arm (22% vs 10%, elsewhere this has been reported as 11% vs 1% , or 14.6% vs 2.6% ), and were predominantly attributable to Grade 3 ALT/AST increases, which were reversible. However, the protocol was amended (allowing re-challenge at a lower dose) only late during the trial progress. The above could explain the discordance between ORR (better with NUC-1031) and PFS/OS (worse with NUC-1031).
Of note is also that "NuCana believes that the pattern of liver-related TEAEs observed in NuTide:121 is specific to biliary tract cancer and potentially the combination with cisplatin. The pattern of liver-related TEAEs observed in NuTide:121 was not observed in trials that assessed Acelarin as a monotherapy (PRO-001, PRO-105 and ACELARATE) or in combination with carboplatin (PRO-002). Furthermore, this pattern of liver-related TEAEs has not been observed in clinical studies assessing NUC-3373 as a monotherapy (NuTide:301) or in combination with leucovorin, bevacizumab and either irinotecan or oxaliplatin (NuTide:302) or in the clinical study assessing NUC-7738 as a monotherapy (NuTide:701)". In other words, liver toxicity observed with NUC-1031 in NuTide:121 does not represent a platform (ProTide)-wide risk. Most, likely it doesn't even apply to other malignancies, and may even be a limitation of the specific chemotherapy regimen used.
Based on the above, there are valid reasons to believe that failure of the phase 3 was due to severe pitfalls in the trial design. In my opinion, I wouldn't exclude the possibility that Acelarin is better than standard gemcitabine (considering higher ORR). High early discontinuation due hepatic side effects led to much shorter treatment duration and as a result less durable responses (hence lower PFS and OS). A more appropriately designed trial, allowing dose reductions (rather that treatment cessation) in case of liver toxicity may have resulted in better efficacy.
Considering the above, NCNA has not completely abandoned Acelarin and is " assessing future development options for Acelarin in biliary tract cancer which may explore lower doses of Acelarin, alternative combination partners or specific sub-sets of biliary tract cancer patients. Indications other than biliary tract cancer are also being assessed as future development options for Acelarin". Obviously Acelarin clinical development is not a priority for NCNA, and my thesis is not based on Acelarin potential. But I wouldn't exclude successful eventual development of Acelarin a few years from now, especially after further proof-of-concept is established by ongoing trials.
Overview of NUC-3373
As discussed above, NUC-3373 (ProTide 5FU) aims to address shortcomings of traditional 5FU. Preclinical data, as well as early clinical data suggest potential for improved efficacy, as well as improved tolerability and safety. Importantly, NUC-3373 is being administered as a 2-hour infusion (compared to the 46-hour infusion by a portable pump of 5FU).
I am not going to focus on the preclinical data here (I refer interested readers to the latest annual report ) but it is worth mentioning that NUC-3373 has been shown to be much more potent that 5FU against a variety of cancer cell lines (including CRC, ovarian and lung cancer) and may have additional anti-cancer mechanisms of action (including induction of immunogenic cell death). The latter means that NUC-3373 may improve efficacy of immunotherapies.
With regards to clinical data, NUC-3373 is being evaluated in 3 trials;
- Two trials in colorectal cancer; NuTide:302 (ph1b/2 in advanced CRC) and NuTide:323 (ph2 RCT in 2L CRC). This is currently the lead program and for good reasons. 5FU remains the cornerstone of CRC treatment regimens in multiple lines (including 1st and 2nd line). Notably , "approximately 500,000 patients in North America are estimated to receive intravenous 5-FU each year". Just considering CRC, there are about 150K new cases diagnosed per year just in the US. Therefore, just CRC would be a huge target market for NCNA.
- NuTide:303 is a ph1b/2 evaluating NUC-3373 in other solid tumors, in order to identify potential targets beyond CRC. In NuTide:303 NUC-3373 is being evaluated in combination with pembrolizumab (PD-1 inhibitor) "for patients with advanced solid tumors and in combination with docetaxel for patients with lung cancer".
NuTide:302
NuTide:302 is a 3-part trial;
- Part 1; Patients with advanced CRC that have failed at least 2 prior 5-FU-based regimens (i.e. 3L+, median of 4 prior chemotherapy regimens). The aim of Part 1 was to determine whether NUV-3373 should be administered with leucovorin. Based on Part 1 it was established that leucovorin has no impact on the pharmacokinetic or safety profile of NUC-3373.
- Part 2; Patients with advanced CRC that have failed at least 2 prior 5-FU-based regimens (i.e. 3L+, median of 3 and 4 prior chemotherapy regimens in NUFOX and NUFIRI arm, respectively). Part 2 was a dose escalation study of NUC-3373 with irinotecan (NUFIRI) or oxaliplatin (NUFOX) to find the Recommended Phase II Dose (RP2D).
- Part 3 (ongoing) is assessing NUFIRI/NUFOX + bevacizumab in 2L CRC patients (1 prior line of 5FU-based chemotherapy).
Both Part 1 and 2 have been successfully completed. Both part 1 and 2, as well as interim results of part 3, have shown a favorable safety/tolerability profile (better than expected by traditional 5FU, no Grade 4/5 AEs) as well as encouraging signs of efficacy. Of note are the following; (1) Responses (partial response/stable disease) were observed in heavily pre-treated patients that have failed at least 2 prior 5FU-based regimens (most 4L+ in Parts 1 and 2). (2) Duration of responses ((DOR)) was in many patients longer than in prior (typically DOR is expected to get progressively shorter moving to later lines of treatment).
NuTide:323
NuTide:323 is a phase 2 RCT in 2L CRC. Since the comparator arm is FOLFIRI+bevacizumab, the trial will enroll patients for which bevacizumab (rather than targeted therapies) is appropriate. One of the goals of the trial is to compare a Q1W vs Q2W NUFIRI+bevacizumab regimen.
NUFIRI is being administered at the maximum tolerated dose as defined in Part 2 of NuTide-302 (NUC-3373 1500 mg/m2 + LV 400mg/m2 + irinotecan 180 mg/m2), which as depicted above was associated with few Grade 3 AEs and no Grade 4 AEs. Notably, this NUC-3373 dose is lower than the maximum tolerated dose of 2500 mg/m2 weekly, as determined in an earlier phase 1 trial, Nutide-301(this contrasts Acelarin development where the highest dose was advanced in the phase 3, resulting in early treatment discontinuation and shorter duration of response despite higher objective response rate).
NCNA aims to show superiority of NUC-3373 over 5FU, which would be great. However, in my opinion, even non-inferiority (i.e. NUC-3373 being at least as good as 5FU in terms of clinical efficacy) would also make a compelling case in favor of NUC-3373 considering better safety/tolerability profile, as well as patient convenience (NUC-3373 is being administered over a 2-hour infusion, while 5FU is being administered as a continuous 48h-infusion, i.e. the patient has to carry an infusion pump for 2 days).
NuTide-323 is enrolling only a specific subgroup of 2L CRC patients (for which bevacizumab rather than other therapies is appropriate). However, if the trial is succesful it is reasonable to expect that NUC-3373 should be able to replace 5FU in other 2L+ CRC patients, as well as in 1L CRC patients (and probably in additional oncology indications where 5FU is still being used). Therefore, a positive readout (not necessarily superiority, as discussed above) should result in major upside in NCNA stock price.
When to expect a readout for NuTide:323?
According to the latest PR ( Oct 2023 ) 40 patients had been enrolled by that time. Considering that the 1st patient was enrolled in 18 April 2023, this corresponds to about 6-7 patients per month, which is slow considering cash runway. Nevertheless, it is common for enrolment in clinical trials to progress much faster as the study progresses and more sites are initiated (trial is currently being conducted in 55 sites according to ClinicalTrials.gov; 15 site in US, 9 sites in France, 4 sites in Germany, 6 sites in Italy, 14 sites in Spain, and 7 sites in UK). According to NCNA study remains on track for complete enrolment "in the coming months" (according to ClinicalTrials.gov estimated primary completion date is June 2024, while estimated study completion date is December 2024) and NCNA expects to report "data" (hopefully efficacy data) in 2024.
In the phase 3 trial of Acelarin NCNA successfully enrolled n=761 patients with biliary tract cancer from Dec-2019 to Mar-2022 (i.e. over 27 months, corresponding to an average enrolment rate of 28 patients per month). That study had been conducted in more than twice the study sites (125 sites across 15 countries), but incidence of biliary tract cancer (about 8,000 patients in US per year) is much lower compared to incidence of CRC (about 150,000 patients in US per year). Therefore, I am confident that NCNA will meet above timelines for NuTide:323 and report a readout sometime in 2H 2024 (although an earlier interim readout is theoretically possible).
NUC-7738
NUC-7738 is a ProTide transformation of cordysepin, a nucleoside analogue that has failed clinical development due to above-discussed limitations of nucleoside analogues (predominantly the rapid breakdown). NUC-7738 is being evaluated in the ph1/2 NuTide:701 trial. Phase 1 part (a dose escalation study of NUC-7738 monotherapy) has been completed, while phase 2 (either as monotherapy or in combination with pembrolizumab) is ongoing. My thesis is not based on NUC-7738m but it is worth mentioning that encouraging efficacy signals have been reported so far in a variety of tumors, with a favorable safety profile.
For example, NCNA recently reported preliminary results of NUC-7738 in combination with pembrolizumab ((anti-PD-1)) in patients with advanced/ metastatic cutaneous melanoma who had progressed on 1- 2 prior lines. Notably, responses were observed in patients that had progressed after prior anti-PD-1 based therapy, suggesting that NUC-7738 may potentiate activity of anti-PD-1.
Financials
NCNA reported cash and cash equivalents of £17.8M as of Sep 2023. Adding to that £9.43M current income tax receivable and £3.41M "prepayments, accrued income and other receivables" the total sum is £30.64M. For the 9 months ended Sep 2023 operating expenses were £22.98M (R&D £18.2M and administrative expenses £4.78M), corresponding to cash burn rate of £2.55M per month. At this cash burn rate runway should be about 12 months (30.64/2.55), i.e. up to Sep 2024, which should be enough to last through major catalysts (mainly readout of RCT in 2L CRC).
Above cash runway estimation is shorter than NCNA's guidance of an "anticipated runway into 2025". This is because NCNA expects a lower cash burn rate going forward as above-mentioned 9-month cash burn has "been impacted by the payment of accruals for clinical trial expenses relating to the Phase 3 clinical trial of Acelarin and the settlement of obligations arising from the patent infringement litigation in the U.K. and Germany". R&D expenses for Acelarin during that period were £1.93M, while costs arising from the patent infringement litigation related to Gilead litigation was £3M. Therefore, subtracting these 2 costs (£1.93M+£3M) would result in reduction of monthly cash burn by £0.55M. Considering a reduced cash burn of £2M ( £2.55M minus £0.55M) estimated runway is extended to 15.3 months (30.64/2), i.e. to early January 2025 (which matches NCNA's guided runway).
Of note, guided runway is dependent on tax receivables, the timing of which is uncertain ("We plan to fund our cash flow needs through current cash on hand together with the receipt of research and development tax credits from HMRC, the timing of which is outside of our control "). Taking tax receivables out of the equation and considering £17.8M cash and £2M monthly operating expenses would results in a much shorter runway of about 9 months (i.e. June 2024). Therefore, anyone investing in NCNA now should be aware of the risk of dilutive cash raise sometime in 2024 ("In assessing the requirements necessary to continue progressing our research and development activities as currently anticipated and considering the material uncertainty regarding the timing of future cash inflows from research and development tax credits relating to the year ended December 31, 2023, there will be a requirement to seek additional capital to fund operations"). Hopefully, this will be after a positive readout, but raising cash before any major catalyst is likely.
Risks
Anyone considering an investment in NCNA should be aware of the following major risks;
- The most important risk to the thesis is a negative readout from the ongoing RCT in 2L-CRC. Although I predict a positive outcome for the reasons discussed above, a negative outcome would be catastrophic for shareholders and for ProTide platform.
- Unless there is a major positive readout before May 2024, chances are that NCNA won't be able to meet continued listing requirements (specifically a bid price > 1$). Therefore, most likely you should expect a reverse split by May 2024. There is also the theoretical risk of de-listing, if a decision is made against a reverse split.
- As discussed above NCNA's cash runway is a major concern and a dilutive cash raise should be expected sometime in 2024. Nevertheless, I believe that positive results from ongoing trials, especially the RCT in 2L CRC, will open opportunities for funding and/or partnerships. On the other hand, there is the risk that NCNA might elect to raise cash before pending readouts, which would most likely be dilutive.
Notably, NCNA is rated as a "strong sell" by Seeking Alpha's quant system, with low grades in all factors (growth, profitability, momentum, revisions) except valuation. This reflects the high risk associated with investing in this stock.
Conclusion
NCNA is a beaten-down stock and for good reasons, including failure of prior lead candidate in a phase 3 trial (putting the whole ProTide platform into question), precarious financial situation, and risk of delisting. However, there are valid reasons to believe that current lead candidate will succeed, which will open a large target market for NCNA and should result in major profit for investors. Considering delisting / reverse-split risk by May 2024, it is possible that the downtrend may continue pending clinical trial readouts. Therefore, it may be safer to re-consider investing in NCNA sometime later in 2024, possible after a reverse split and before readout of the ongoing RCT. For me, the asymmetric risk/reward is worth a bet and I believe the stock has been punished enough in 2023 (tax-loss harvesting might have also played a role in the downward trend of the stock the last couple months). Therefore, I have started a small position, and may add later in 2024 (depending on further news by then). But I have to highlight again this is not an investment for everyone and there is considerable downside risk.
Your feedback is appreciated
Please comment below if you have any feedback (positive or negative), if you spot any mistakes, or if you believe I missed something important in my analysis.
Also I suggest tracking comments if you are interested in following the stock as I may post updates there.
For further details see:
NuCana: Potential Turnaround In 2024 But Risky