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Kymera (NASDAQ:KYMR) is an R&D-heavy company, but its pipeline is so early stage, nobody knows how to value this company. Especially in a bear market and especially when they are saying the biopharma sector is going through a “correction.”
Kymera is a strong second fiddle to Arvinas (ARVN) in the protein degrader space. The company’s platform is called PEGASUS, which matches E3 ligases with harmful proteins in order to design bifunctional small molecules which degrade the harmful, disease-causing proteins. Its latest stage candidate is in phase 1. Known as KT-474, this molecule, partnered with Sanofi, is, according to the company, “a potent, highly selective, orally bioavailable IRAK4 degrader, for the treatment of IL-1R/TLR-driven conditions and diseases with high unmet medical need.” These indications include atopic dermatitis (AD) and Hidradenitis suppurativa (HS), and may also include macrophage activation syndrome, general pustular psoriasis, and rheumatoid arthritis (RA) in the future. Patients have been enrolled in the said phase 1 trial, with patient data expected in 4Q. Some data was presented from the single ascending dose portion of the trial in June last year:
In June 2021, Kymera announced positive interim results from the Single Ascending Dose (SAD) portion of the Phase 1 clinical trial of KT-474, demonstrating the first degrader proof-of-mechanism in targeted protein degradation in a randomized, placebo-controlled healthy volunteer study. KT-474 achieved and exceeded the Phase 1 degradation goal of 85%, with maximal degradation of 94%, within the SAD portion of the Phase 1 trial dosed to date, with profound IRAK4 degradation after a single oral dose that lasted for at least six days at all dose levels (25, 75, 150 and 300 mg), with no treatment-related adverse events observed.
IRAK4 degradation is a clinically validated pathway, meaning there are existing drugs that have shown that inhibiting IRAK4 leads to therapeutic benefits. There are couple of molecules – from Pfizer (PFE) and from Curis in the industry. So Kymera needs only to focus on degrading IRAK4; its connection to a therapeutic benefit, especially in I/I but also in oncology, is more or less established in literature.
In May this year, Pfizer’s IRAK4 inhibitor – not degrader – PF-06650833 was canned by the company after it failed to have any beneficial impact on HS patients. Kymera stock fell as a result because investors though the mechanism of HS treatment through IRAK4 inhibition is unproven, therefore IRAK4 degradation is also risky. However, this may not be true, and we shall see what happens in Q4 when data comes out. Curis’s Irak-4 inhibitor emavusertib was also put on a clinical hold by the FDA in two separate indications.
Two other programs, IRAKIMiD and STAT3, are also in phase 1 trials with proof of mechanism data expected this year. The first program, IRAKIMiD, is a “novel heterobifunctional degrader that target degradation of both IRAK4 and IMiD substrates Ikaros and Aiolos with a single small molecule, addressing both the IL-1R/TLR and the Type 1 IFN pathways synergistically to broaden activity against MYD88-mutant DLBCL.” The second program, STAT3, approaches a previously “undruggable” target for treating hematological malignancies and solid tumors, as well as autoimmune diseases and fibrosis. This, too, will produce proof of mechanism data this year.
In my previous article, I discussed some of their science. I quoted something from Kymera’s CEO Nello Mainolfi which explains the advantages of targeted protein degradation:
The inherent ability to combine the power of genetic-like knockdown with the flexibility of small molecules; the power to drug classes of targets that have been elusive to other therapeutic modalities; the use of affinity rather than occupancy-based catalysis…
Kymera’s industry partners include Sanofi (SNY) and Vertex (VRTX). The Sanofi partnership started in 2020 with $150mn in upfront payment. The deal is valued at $2bn in potential milestone payments plus tiered royalties. The focus is on IRAK4 in immuno-inflammatory diseases. Kymera just has to advance the molecule through phase 1, and once the POM is handy, Sanofi takes over. KYMR retains U.S. co-dev and co-co opt-in rights, and rights to IRAK4 in oncology. Pretty good deal for an early stage company, thoroughly derisking their phase 1 program.
The Vertex program focuses on non-core areas, excludes both oncology and I/I. The deal is worth $70mn upfront and $1bn in milestone payments plus tiered royalties.
The company reached a 52-week low this May after there was a revenue miss – which isn’t itself a big deal in an emerging company; and a slight delay in lead data readout after they extended dosing to 28 instead of 14 days. The extension was done in consultation with both the FDA and partner Sanofi, in order to get better safety data and exploring clinical endpoints.
Financials
KYMR has a market cap of $1.68bn and roughly $600mn in cash reserves. Research and development expenses were $43.9 million for the third quarter of 2022 while general and administrative expenses were $10.6 million. The company has enough cash to last it 8-10 quarters.
In August, Kymera received an unsolicited offer to provide $150mn in PIPE financing, “selling 2.7 million shares at $26 a share and then “pre-funded warrants” to buy 3 million more shares at just the slightest bit under $26 a share.” The name of the lead funder was undisclosed. As CEO Nello Mainolfi said, “they basically said, we love what you guys are doing, would love to give you guys more money.”
Bottomline
The Pfizer IRAK4 fiasco worries me a little. I think this is Kymera’s most critical short term risk. If the molecule gets through and Sanofi takes over, that will push up the stock heavily. If the results are inconclusive or worse, I think there will be a major correction in KYMR stock. The company has solid cash and science, so there’s an opportunity for risk taking biopharma investors here.
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