Connect Biopharma: A Last Hurrah From CBP-307 (NASDAQ:CNTB)

Connect Biopharma Holdings Limited (NASDAQ:CNTB) is a microcap ($66 million) biopharmaceutical company developing T cell-driven therapies to chronic inflammatory diseases. They have 3 drug candidates in the clinical-stage (Figure 1). However, the pipeline will dwindle down to one drug in active development by the second half of 2023. Investors mainly have one scheduled catalyst in H1, but it’s a long-shot at moving the share prices.

Figure 1. Pipeline, Page 4 of January 2023 Corporate Presentation

The Global Phase 3 program for CBP-201 in moderate-to-severe atopic dermatitis (‘AD’) was to start before the end of 2022 before being shelved. It joins CBP-174 and soon CBP-307 in mothballs. After the positive topline Stage 1 data readout on October 4, Connect Bio plans to have pre-New Drug Application (NDA) interactions with the Center for Drug Evaluation (‘CDE’) of China’s National Medical Products Administration in the first quarter of 2023. Completion of the 36-week Stage 2 period, which includes a potentially differentiated once a month dose regimen, is anticipated in H2 2023. The Company affirmed a potential NDA filing as early as 2024 and potential approval in China as early as 2025. There is also the Global Phase 2 asthma trial anticipated to complete in H1 2023 and reporting top-line results in H2.

CBP-307 does have a final role to play. The Global Phase 2 maintenance phase of the CBP-307 moderate-to-severe Ulcerative Colitis (‘UC’) trial is expected to be completed in the H1. In the previously reported efficacy data last May for the 12-week induction phase of the trial, CBP-307 0.2 mg once daily failed the primary endpoint (‘PEP’) of change in adapted Mayo Score (‘aMS’) from baseline to Week 12. However, patients on CBP-307 achieved Clinical Remission based on aMS compared to placebo (28.3% vs 9.6%, treatment difference=18.7%; p=0.016) and in Clinical Response as measured by complete Mayo Score (52.8% vs 30.8%, difference=22.0%; p=0.023). This performance compares favorably with the pivotal Phase 3 induction trial results of Zeposia (18% vs 6%, Remission difference=12%; p<0.0001 and 48% vs 26%, Response difference=22%, p<0.0001), which was approved in 2021 and highlighted as one the few Bristol Myers Squibb (BMY) ‘New Products’ that are covered by a majority of top insurance plans.

In the maintenance phase, CBP-307 responders were treated for an additional 36 weeks in a double-blind manner, while non-responders entered an open-label treatment arm, also for an additional 36 weeks. CBP-307 should trounce Zeposia’s maintenance showing (37% vs 19%, Remission difference=19%, p<0.0001 and 60% vs 41%, Response difference=19%, p<0.0001). Because Clinical Remission on aMS has been accepted by the FDA as the PEP in pivotal trials for prior approved UC treatments, investors should hope that CBP-307 succeeds in big way, in order to lure partners for further development in UC and Crohn’s disease.

Risks and Takeaways

Some of the key points from our article from October remain:

Connect Biopharma is a speculative microcap biotech stock with no approved products and no revenues. Although a new 5% owner (James Huang’s Panacea Opportunity Fund with 2.82 million shares) came out of nowhere in 2022, most institutions and mutual funds can’t buy into it until the stock passes the $5/share threshold. The iShares Biotechnology ETF (IBB) and SPDR S&P Biotech ETF (XBI) may be safer means of exposure to the sector, especially for those who get anxious from volatility. Indeed, since October 4 (Figure 2), CNTB sank to the sub-$1 depth but rose again and is barely back to pre-readout levels.

Figure 2. Price chart since October 4, 2022

To conclude, the UC trial is likely to be positive, but it is a small study and with CBP-307’s future in limbo, the market might shrug it off. Further down the road, by focusing on the ongoing pivotal AD trial in China, Connect Bio will be extending their cash runway ($181.5 million at September 30, 2022) into at least 2025, and it is very unlikely to need any additional funding. And as the CBP-201 approval timeline remains on track, the projection in the September article of $120 million in CBP-201 sales annually as early by 2026 still apply. The estimate is very conservative, even if it doesn’t take into account increased competition from Rinvoq from AbbVie (ABBV) or other drugs that could be approved sooner. Given the excellent results so far, the chance of rejection by the CDE is very slim. As always, partnerships are key; there’s no telling if or when it happens, but any deal could push this stock back to the $3 range from last April.

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.