Checkpoint: Potential Upside Based On Marketing Application (NASDAQ:CKPT)

Checkpoint Therapeutics, Inc. (NASDAQ:CKPT) is a great speculative biotech play to look into. That’s because the company remains heavily undervalued based on its recent progress. It had already achieved the primary endpoint in a registration-enabling study using its anti-PD-1 drug known as cosibelimab. This was a late-stage study using this drug in patients with metastatic cutaneous squamous cell carcinoma (cSCC). Where does the potential upside lie? Well, if all goes according to plan, then Checkpoint will submit marketing applications for cosibelimab in both the U.S. and European territories. The Biologics Licensing Application (BLA) for cosibelimab is expected in late 2022 and then shortly after that the Marketing Authorization Application (MAA) to the European Medicines Agency is expected.

I think there is potential value here in that it’s possible for cosibelimab to become a disruptive entry into the PD-1/L-1 market. The reason why is because it may be safer and the intention is to be a cheaper alternative compared to the current PD-1 therapies like Keytruda and Opdivo, which come from Merck & Co., Inc. (MRK) and Bristol-Myers Squibb Company (BMY), respectively.

Study Success For Registration Enabling-Study Sets Up Major Catalysts

The thing is that Checkpoint Therapeutics already announced positive results from its registration enabling study using cosibelimab for the treatment of patients with metastatic cutaneous squamous cell carcinoma. Squamous cell carcinoma (SCC) is also called cutaneous squamous cell carcinoma. As the name suggests, it is cancer of the skin whereby there is an accelerated growth of squamous cells. It is the second most common form of skin cancer in the United States and is responsible for about 7,000 deaths per year in this territory.

Why go after this specific type of cancer first to prove the anti-PD-L1 theory? Well, for starters, skin cancer is a bit easier to treat. Especially, when it is caught early. It is said that if SCC is caught early, it can be cured easily. However, since Checkpoint is using an anti-PD-L1, it is going after the metastatic SCC population. The company states that analysts believe that the market opportunity for this population could be $1+ billion.

Not only that, but if you look at the pipeline specifically, it is going after other SCC populations. For example, they are also going after the locally advanced SCC and the neoadjuvant/adjuvant SCC market as well. These indications are all going to be using single-agent Cosibelimab. From there, the market opportunity could eventually grow even more with success in single-agent work being done. The bottom line is that the use of Cosibelimab in SCC is only the beginning in terms of indications. If it can be applied to other cancer indications, then it can potentially become a disruptive product in the $30 billion PD-(L)1 class.

How can it do that? Well, Checkpoint Therapeutics states that it can be different from currently available checkpoint inhibitors and it will be able to price itself at a much lower cost. Therefore, my feeling is if it can have a lower cost and be more efficacious over other PD1 drugs, then it has a chance to capture a huge chunk of the market. That’s not to mention that it could also possibly be a safer alternative for patients to take.

What makes Checkpoint Therapeutics a great speculative biotech play is that cosibelimab has already achieved success in a registration enabling study. This was a study which recruited a total of 78 metastatic cSCC patients. Patients were given a fixed dose of 800 mg every two weeks of cosibelimab and followed for efficacy. It was noted that there was a confirmed objective response rate (ORR) of 47.4% achieved for patients receiving this PD-1 therapy from Checkpoint Therapeutics. In essence, the primary endpoint of the study was met.

Having said that, there are two major catalysts that are approaching. One of these major catalysts is expected towards late 2022. That will be the filing of the Biologics Licensing Application (BLA) to the FDA for cosibelimab for cSCC. The other catalyst is expected shortly thereafter, and it will be the filing of the MAA to the EMA for cosibelimab for the same indication.

How can cosibelimab be a safer alternative compared to current PD-1 therapies? Well, it’s all due to the different mechanisms of action it utilizes. It has a two-fold mechanism of action of engaging both T-cells and natural killer (NK)) cells. In addition, its PD-L1 binding is safer. This creates lower rates of severe or worse events compared to current PD-1/L1 therapies.

Expansion Opportunities Exist For Cosibelimab And Olafertinib For Non-Small Cell Lung Cancer Patients

The potential to receive marketing approvals for cosibelimab in patients with metastatic cSCC may only be the beginning. That’s because there is a potential expansion opportunity to use cosibelimab for the treatment of patients with non-squamous non-small cell lung cancer. Back in December 2021 Checkpoint initiated a phase 3 study known as CONTERNO. This is a late-stage study using cosibelimab in combination with pemetrexed and platinum chemotherapy for 1st-line treatment of patients with non-squamous non-small cell lung cancer. A total of 560 patients will be randomized 2:1 in the phase 3 study to receive either:

• 1200 mg of cosibelimab every 3 weeks combined with pemetrexed and investigator’s choice of platinum chemotherapy (carboplatin or cisplatin)
• pemetrexed and platinum chemotherapy alone

One thing to note is that these are patients who have not been previously treated (1st line) and who do not have an EGFR or ALK mutation. The primary endpoint will be overall survival (OS). Then, there is another opportunity for cosibelimab for patients with non-small cell lung cancer (NSCLC). However, this time it will be with the use of cosibelimab plus chemotherapy for the treatment of EGFR mutant NSCLC patients.

These are just a few shots on goal in the very large NSCLC market. It is expected that the global non-small cell lung cancer market could grow to $11.87 billion by 2028. Having said that, even if the company only goes after certain types, it would still be a huge market. For instance, EGFR overexpression has been found between 40% to 89% of NSCLC. Additional shots on goal exist with the use of another drug the company is developing known as olafertinib. Olafertinib is a 3rd generation EGFR inhibitor. It is being explored in one study that is targeting 1st line EGFR mutant NSCLC patients and then in another study going after EGFR mutant NSCLC patients.

Financials

According to the 10-K SEC Filing, Checkpoint Therapeutics had cash and cash equivalents of $54.7 million as of December 31, 2021. The company remains speculative based on its pipeline, but it also had to raise cash from time to time through a few methods. For example, in September of 2020, it sold 7,321,429 shares of common stock in an underwritten public offering at a price of $2.80 per share. At that time, it raised about $18.9 million in total proceeds from that offering. In the year ending December 31, 2021, it sold a total of 11,899,983 shares of common stock under an ATM it had for net proceeds of $41.3 million at an average selling price of $3.47 per share.

The company believes that it has enough cash on hand to fund its operations for at least the next 12 months from the date of the 10-K SEC Filing, which was filed on March 28, 2022. It may choose to raise cash if the stock climbs on the back of positive news, so please keep that in mind as well.

Risks To Business

The biggest risk of all would be the large hurdles ahead for Checkpoint for cosibelimab. Even though it has succeeded in a registration enabling study in patients with metastatic cSCC, it still has to go through the approval process with both the FDA and EMA. That means there is no guarantee that it will obtain regulatory approvals for one or both of these territories.

The second risk involves the expansion opportunities for both cosibelimab and olafertinib for the treatment of patients with non-small cell lung cancer (NSCLC). Even though cosibelimab obtained an ORR of 47.4% in patients with cSCC, there is no guarantee that a similar or better outcome will be seen in metastatic non-squamous NSCLC or in EGFR mutant NSCLC patients. Olafertinib holds potential as a 3rd generation EGFR inhibitor, but it remains to be seen if it too can achieve a high Objective response rate (ORR) for EGFR mutant NSCLC patients.

The final risk would involve the company’s financials. That’s because it will still need to raise cash through the sale of equities. That means it is likely to sell shares or raise cash again at least before the end of 2022.

Conclusion

The final conclusion is that Checkpoint Therapeutics is a great speculative biotech to look into. It is still risky because it has not yet filed its BLA to the FDA or MAA to the EMA, though investors have these major catalysts to look forward to. The first filing will deal with the BLA to the FDA for cosibelimab for the treatment of patients with cSCC, which is expected to be filed in late 2022. From there, the European regulatory application should happen soon after.

I think it is great that it is already in the process of using cosibelimab towards other shots on goal like 1st line NSCLC and then EGFR mutant NSCLC. It even has a 3rd generation EGFR inhibitor it is working on known as olafertinib, which is being developed to treat patients with EGFR mutant NSCLC as well. For all these reasons, these are why I believe that Checkpoint Therapeutics is a great speculative biotech to look into.