Since our last article discussing Kintara Therapeutics (NASDAQ: KTRA) underappreciated value proposition to investors, CEO Saiid Zarrabian has solidified the company’s position for growth in 2021 and beyond. In this article, we will elaborate on why we feel that KTRA is an attractive investment for investors looking for 2-5X+ potential returns over the next 1-3 years with a favorable risk profile, in our view. For our notes, chart and past materials on KTRA, click here.
KTRA’s lead asset VAL-083 is well-defined and has a clear path to commercialization in 2024, potentially through accelerated approval
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A unique part of KTRA’s business strategy is leveraging the significant prior investment in its lead asset VAL-083 by the US National Cancer Institute (NCI). Before KTRA undertook the development of VAL-083 it was tested in 42 Phase 1 and 2 (P1/P2) NCI-led clinical trials in various cancers yielding a safety database of ~1,100 patients. KTRA mitigates additional clinical risk by focusing on the subpopulation of Glioblastoma Multiforme (GBM) with the highest unmet need (unmethylated MGMT gene status).
Due to its novel mechanism of action as an alkylating agent that crosses the blood-brain barrier, VAL-083 offers MGMT unmethylated patients hope. Currently, they are treated with the standard of care (Temozolomide + radiation therapy) even though it provides little to no survival benefit. As KTRA’s studies of VAL-83 in GBM have matured we gained increasing confidence in its promising efficacy and safety effects in GBM relative to the standard of care (SOC) (see Figure 1, 2). Our bullish stance was reinforced by the invitation for VAL-083 to participate in the Global Coalition for Adaptive Research’s (GCAR) adaptive P2/3 GBM AGILE (Glioblastoma Adaptive Global Innovative Learning Environment) clinical trial.
Earlier this year KTRA and (GCAR) announced the start of enrollment in GBM AGILE. Along with two other pharmaceutical companies (Kazia Therapeutics (NASDAQ: KZIA) and Bayer (OTCMKTS: BAYRY)), this randomized, controlled trial will evaluate the three respective drugs across three different settings of GBM (newly diagnosed methylated MGMT, newly diagnosed unmethylated MGMT, and recurrent). Of note, VAL-083 is the only one being evaluated in all three settings.
Participating in GBM AGILE has key advantages over the conventional development strategy of running pivotal trials independently. For one, there are significant cost savings to the tune of potentially $14M and a shortened time to a new drug application (NDA) submission by up to 18-months. Additionally, KTRA has access to GCAR’s vast network of prestigious investigators and trial sites (over 38 actives so far for GBM) as well as a patient-centric study design.
In GBM AGILE patients have an 80% chance of getting one of the treatments over the control which compares favorably to other P2/3 controlled GBM studies potentially accelerating the enrollment rate, in our view. On 5/17/21 GCAR tweeted that it screened the 600th patient (~100 will be enrolled in each experimental and control arms).
This update supports management’s expectation for VAL-083 to graduate from Stage-1 of the trial to Stage-2 around 1H22. Pending VAL-083’s success in GBM AGILE, we feel that KTRA has a shot at earning accelerated approval from the FDA. If granted, accelerated approval would allow KTRA to commercialize VAL-083 based on data from GBM AGILE.
We feel that receipt of accelerated approval for Avastin in 2008 in breast cancer based on data from an adaptive clinical study sets the precedent for KTRA. Of note, though, approval for Avastin was eventually revoked due to a lack of clinical benefit. This is just speculation and will depend on many factors, known and unknown.
KTRA is a front-runner in the race to develop new therapies for GBM
In Table 1 we can see KTRA is positioned competitively as VAL-083 enters pivotal P2/3 trials in GBM. Next to only CNSP which has a less mature pipeline, KTRA market cap is significantly discounted relative to its peers. While there is good reason for some of the disparity, especially compared to a pharma giant like BAYRY, we feel that KTRA’s valuation should more closely align with that of KZIA ($130M).
KZIA’s lead GBM asset Paxalisib is entering P2/P3 trials in GCAR’s adaptive GBM trials (same KTRA). Unlike KTRA’s VAL-083, Paxalisib is only being tested in two of the three GBM treatment settings (newly diagnosed unmethylated and recurrent GBM), although it is also being advanced in other cancer indications internally at KZIA and by other sponsors. Furthermore, Paxalisib was granted Rare Pediatric Disease Designation (RPDD) in August 2020 for the treatment of DIPG, a rare and aggressive childhood brain cancer. The significance is that if approved for DIPG the company would be eligible to receive a priority review voucher
There is also some symmetry between the cap structures of KTRA and KZIA. Both have a low number of shares outstanding (13M; 32M for KZIA and KTRA, respectively), modest cash positions near $17M, and a quarterly cash burn of ~$7-8M. One notable difference is that KTRA has a larger warrant overhang from toxic financing deals done by the previous CEO. Nonetheless, KTRA has more shots on goal in GBM and is thus better positioned, in our view, to capture the $1.5B+ total addressable GBM market.
Milestones on The Horizon
The next expected milestone is the top-line P2 recurrent GBM data set to be published at the end of 2Q21 (i.e., by the end of June 2021). After that will be top-line P2 adjuvant GBM data due sometime in July 2021. We suspect these readouts will be in line with previous updates. As such we do not expect it to alter our investment thesis. However, historically KTRA has sold off on data catalysts even when the data met or exceeded expectations. If that is the case with these next two updates, we would view it as an opportunity to buy the stock at better prices.
We feel that KTRA will do well in the back half of 2021 as its CMBC program gets off and running (4Q21-1Q22) and the P2/3 GCAR study nears its first major milestone (graduation from Stage in 1H22 assuming positive data). The Stage 1 readout will be triggered once an efficacy threshold is hit in each respective treatment setting for VAL-083. A maximum of ~150 patients will be enrolled in each arm with ~20% being randomized to a control arm (TMZ + radiation therapy). The primary endpoint will be overall survival; secondary endpoints will be progression-free survival (PFS), tumor response, and duration of tumor response.
KTRA remains an attractive investment for us with GBM AGILE underway and VAL-083 as the only candidate being evaluated in newly diagnosed methylated MGMT, newly diagnosed unmethylated MGMT, and recurrent GBM. Additionally, REM-001 provides us with exposure to the $500M+ CMBC market opportunity and is entering late-stage studies this year. To complete pivotal studies and commercialize both assets KTRA will need to do at least one more round of financing. This is not too much of a concern for us at these levels due to our belief that KTRA is trading at a significant discount to fair value ($100M+). Like the last offering at $1.16, we could see KTRA pump afterward with the removal of a cash overhang and a clear path to regulatory approval for VAL-083 in 2024 pending data from GBM AGILE. With regards to KTRA’s commercial strategy, we feel that management will elect to license out VAL-083 to a big pharma player with an oncology business and historic interest in GBM. Some potential names that come to mind are Bristol Myer Squibb (BMY), AstraZeneca (AZN), and Merck (MRK). This is just speculation on our part. If this strategy did materialize it would be a few years out. For now, we are vigilantly following the progress of VAL-083 through GBM AGILE and REM-001 as its CMBC program gets revived