gorodenkoff
It wouldn’t be fair to say that there’s been no clinical progress at Aptose Biosciences (NASDAQ:APTO) since my last update, but there certainly hasn’t been enough to really sway investor sentiment, particularly in light of a more risk-averse biotech market. Aptose has two credible hematological oncology products in the pipeline, but there is a still lot of de-risking needed for both programs.
I do believe that the market is still heavily discounting the odds of clinical success here, but given the history of oncology drug development, and Aptose’s own shaky clinical progress, that’s not exactly unfair. I can still see a path toward a substantially higher fair value, but the reality is that investors are likely going to need to wait a year or more for sentiment-moving data.
‘239 Is Worth Further Exploration
From five complete responses and one partial response back at the December 2021 ASH update, Aptose has seen two more complete responses in its HM43239 (or ‘239) program in relapsed or refractory AML, bringing the total to seven complete responses and one partial response among a 80mg, 120mg, and 160mg dosing group that has treated at least 41 patients as off the last cut-off (early June, ahead of the EHA meeting).
Thus far the drug has shown encouraging safety/tolerability, with only one dose-limiting toxicity reported so far (muscle weakness in a patient getting a 200mg dose). While the response rates aren’t eye-popping at this point, it’s worth remembering that these are not the healthiest patients, as they’ve already seen drug progression after prior treatments.
Based on the early clinical results, management is moving forward with further dose exploration at 80mg, 120mg, and 160mg (the 80mg segment has been completed, with the 120mg and 160mg cohorts about half-complete as of early June) and then two expansion studies. One expansion study will use 120mg (with 80mg and 160mg as bracketing dosages) of ‘293 as a single-agent therapy in FLT-3 mutated and unmutated AML, while the other will be a combination study with venetoclax (Venclexta, marketed by AbbVie (ABBV) and Roche (OTCQX:RHHBY)).
The single-agent study should start later this year, with the combo study slated for the first half of 2023. Should the results of these studies merit it, registrational studies would then start – presumably in 2024 for the single-agent study.
It’s worth remembering that ‘293 is targeting the challenging r/r AML market. While there are solid treatment options available as front-line therapies, some patients cannot tolerate them, some do not respond, and others ultimately see their disease mutate around the treatment and become non-responsive/relapsing. Keep this in mind when comparing response rates to other drugs in the space (make sure it’s an “apples to apples” comparison).
Another Chance For Luxeptinib
Aptose’s prior lead drug, luxeptinib, still factors significantly into the company’s clinical plans today. While the drug showed exciting pre-clinical attributes, clinical results today have not matched that potential. It would seem that the pharmacokinetics of the drug are at least partly to blame, and the company is hoping that a reformulated version of the drug (known as “G3”) can lead to patients getting consistent therapeutic doses that produce clinical results.
Clinical trial work is underway now, with patients getting G3 at 50mg, 100mg, and 200mg doses and the 50mg dose of G3 demonstrating 200x the exposure level of a 150mg dose of G1. Assuming that the pharmacokinetics and pharmacodynamics (PK and PD) studies merit further development, Aptose should be able to start dose escalation studies of the new formulation in the first half of 2023 in patients with r/r B-cell or r/r AML disease.
I continue to believe that it’s worth the effort to see if the new formulation can unlock real clinical results with luxeptinib. As a pan-FLT3/BTK inhibitor with low off-target activity, this could be a very appealing option for patients with few other clinical options (including those who develop resistance to drugs like Imbruvica).
The Outlook
I do not value either of Aptose’s drugs for front-line use potential. Maybe clinical data will support development for that sort of use, but that is years down the road. Focusing on the relapsing/remitting market does mean lower potential patient populations, but the markets are still large enough to support $1 billion-plus revenue potential if the drugs are effective and tolerable.
A best-case scenario could arguably see over $2.5 billion in combined revenue for ‘239 and luxeptinib, but the reality is that the market is nowhere near the point of crediting the stock for that potential. That’s fair given where the data are today, but it also creates an opportunity for Aptose to build value with positive clinical updates for both programs. At this point I’m assigning only 10% odds of success for both drugs. I say “only” but actual clinical success rates for Phase I oncology drugs is more in the neighborhood of 5%; I believe the data seen to date from ‘239 and the strong preclinical data on luxeptinib still support the higher 10% number.
The Bottom Line
Discounting the peak potential revenue by the low odds of success and the decade-plus of clinical and commercial development it will take to reach those peak sales estimates, I believe Aptose shares are worth around $4 today. That suggests meaningful upside, but I don’t want to ignore or wave past the long odds that Aptose is facing – while positive clinical data in 2023 and 2024 could rebuild sentiment here and make this company a contender, this is not a stock for investors who can’t accept the risk of major (if not near-total) losses even after the declines that have already been seen.
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