Lowering Target to $37 Pending New Plans for CD40LGVAX
CBMG Shares Hit by Weak Biotech Sector and China Market
CAR T-Cell EGFR/HER1 in Lung Cancer Data Soon
Adds Executives from MedImmune/AZN & GlaxoSmithKline
Download Full 41-Page Update Report with Important Disclosures: CBMG Update 08-17-15
CBMG Takes Over CD40LGVAX Vaccine Sponsorship: On June 29, 2015, CBMG announced their acquisition of CD40LGVAX, an “off-the-shelf” lung adenocarcinoma vaccine that would begin clinical trials by year-end 2015 and sponsored by the Moffitt Cancer Center in combination with Bristol-Myers Squibb’s (NYSE:BMY Not Rated) anti-PD-1 checkpoint inhibitor Nivolumab (Opdivo®). On August 11, 2015, Moffitt began transferring the sponsorship (ownership) of the trial to CBMG which is now evaluating both U.S. and non-U.S. options for CD40LGVAX clinical trials. Some possibilities are a multi-center trial, which would enroll faster than the single-center Moffitt trial, in combination with nivolumab or another checkpoint inhibitor and/or a co-stimulatory agent as well as trials in China. However, at this time the current uncertainty about the timing, design, locations and costs reduces our valuation of CD40LGVAX from $110M to $55M or $5.00 per share until we have more visibility for their development plans in the U.S and/or China. (see CD40LGVAX Lung Cancer Vaccine)
CBMG Shares Impacted by Weakness in both the Biotech Sector and China Stock Market: CBMG shares have been adversely affected by the recent weakness in Immuno-Oncology stocks, a biotech sector that we believe will regain strength as more newsflow and clinical trial results are reported in the future. Although CBMG shares are only traded in the U.S., the recent volatility in the China stock market has also impacted CBMG shares as seen below:
Maintaining Strong Speculative Buy – Lowering Target to $37.00: Despite solid progress in building a world-class scientific and clinical development team with a significant pipeline of cellular and immunology drug candidates under development, CBMG shares have been negatively impacted by the simultaneous sector-wide decline in the immuno-oncology space and the market concerns in China. We believe both issues are overdone and expect a more stable environment will be forthcoming. That said, the change in CD40LGVAX development plans now makes it difficult to value until the clinical pathway becomes better defined. For CBMG’s CAR T-cell program we are valuing at $145M ($12.00 per share) while we are valuing the CD40LGVAX program at $55M ($5.00 per share) as well $3.50 per share for their preclinical 3rd-generation anti-PD-1 checkpoint inhibitor program for a valuation of CBMG’s immuno-oncology programs of $20.50 per share. Our valuation for the technical services and clinical stem cell programs is $16.00 per share based on a 45x multiple on projected fiscal year 2020 EPS and discounted 35% for cumulative risk plus $0.50 per share for the preclinical Asthma and COPD programs for a total of $16.50 per share. (see Market Size and Financial Assumptions)
RECENT MANAGEMENT ADDITIONS:
Chief Scientific Officer from MedImmune/AstraZeneca: On August 8, 2015, CBMG announced the appointment of Yihong Yao, Ph.D., B.S. as Chief Scientific Officer to lead their Immuno-Oncology programs (CAR-T and CD40LGVAX) and the inflammatory/autoimmune disease programs as well as clinical trial design and bioinformatics. Dr. Yao received his B.S. degree in Biochemistry from the Department of Biochemistry, Fu Dan University, Shanghai, China, a Master’s Degree in bioinformatics from Boston University and his Ph.D. in Molecular Biology & Biochemistry from the Department of Biochemistry, University of Kansas, Lawrence, Kansas, USA. He completed his Postdoctoral Fellowship at Johns Hopkins University, School of Medicine, Baltimore, Maryland, USA. In addition to his strong academic background, he has over fifteen years of professional experience with pharmaceutical and biotechnology companies including MedImmune biologics research and development arm of AstraZeneca (NYSE:AZN Not Rated), and Abbott Bioresearch Center (NYSE:ABBV Not Rated). Dr. Yao is the co-inventor of twenty-six filed patents relating to tumor classification, degenerative muscle disease and autoimmune disease diagnostics and treatment. He has published over sixty papers in translational science peer-reviewed journals and has authored or co-authored two books on the subjects of inflammatory and autoimmune diseases and genomic biomarkers. Dr. Yao is a frequently invited speaker and panelist for many international conferences on biomarkers, personalized medicine, miRNA, rheumatology and oncology.
Chief Operating Officer from GlaxoSmithKline: On May 27, 2015, CBMG announced the appointment of Richard L. Wang Ph.D., MBA, PMP as Chief Operating Officer. Dr. Wang most recently held the position of senior site leader of GlaxoSmithKline’s (NYSE:GSK Not Rated) Research & Development in Shanghai, China, since 2013, and also held the position of Senior Director and Head of Operations of GSK R&D since 2011. From 2007 to 2011, Dr. Wang was the Director, Head of Strategic Alliance (Asia), and Portfolio and Operation Management of Innovation Center China & Global Oncology, AstraZeneca (NYSE:AZN Not Rated) Global R&D in Shanghai, China. From 2004 to 2007, Dr. Wang was Associate Director, Discovery Portfolio and Early Development Project Management, R&D Operations Pharmaceutical Research Institute, Bristol-Myers Squibb (NYSE:BMY Not Rated), in Wallingford, Connecticut. He holds a bachelor’s degree in Cell Biology from University of Science & Technology of China, a PhD in Molecular Biology from University of Maryland, Baltimore, and an MBA from Xavier University. Dr. Wang is a frequent invited speaker and panelist for many international scientific and pharmaceutical R&D and business forums in China and Asia, and a Lecturer of Drug Discovery and Development courses at the University of Science & Technology of China and Shanghai Jiaotong University.
Chairman of Scientific Advisory Board: On July 8, 2015, CBMG announced the appointment of Alan List, MD as Chairman of the Scientific Advisory Board. Dr. Alan List is currently the President and Chief Executive Officer of Moffitt Cancer Center and Research Institute in Tampa, FL. Dr. List is internationally recognized for his many contributions in the development of novel, more effective treatment strategies for myelodysplastic syndrome (MDS) and acute myeloid leukemia (AML). His pioneering work led to the development of lenalidomide (Revlimid®) from the laboratory to clinical trials, which went on to receive fast-track designation from the U.S. Food and Drug Administration and approval for the treatment of patients with MDS and multiple myeloma. This work transformed the natural history of MDS from a premalignant condition that progressed to malignancy requiring aggressive treatment to a condition managed in the outpatient setting with oral agents. Previously Dr. List served as Executive Vice President and Physician-in-Chief, the Vice Deputy Physician-in-Chief, and the Chief of the Malignant Hematology Division at Moffitt, where he holds the Morsani Endowed Chair. Before joining Moffitt in 2003, Dr. List was a Professor of Medicine at the University of Arizona, Tucson, where he also served concurrently as the Director of the Leukemia and Blood and Marrow Transplant Program and Director of the Division of Translational/Clinical Research Program. After earning a medical degree in 1980 from the University of Pennsylvania, Philadelphia, Dr. List completed an internship and residency in internal medicine at the Good Samaritan Medical Center in Phoenix, Arizona. He then completed fellowships in hematology and medical oncology at Vanderbilt University Medical Center in Nashville, Tennessee. Dr. List receives peer-reviewed NIH support for his work and publishes extensively in the areas of MDS and acute leukemia. He is the author of more than 280 peer-reviewed articles and the Clinician’s Manual on Myelodysplastic Syndromes (2008).
OTHER CBMG RECENT NEWS:
CFDA Certifies Preservation Kits: CBMG continues to progress in their clinical trials for their ReJoin™ adult mesenchymal stem cell candidate using a patient’s own (autologous) adipose (fat) tissue to treat Knee Osteoarthritis (KOA) and Cartilage Defect (CD). On July 27, 2015, CBMG announced they received 2 new certifications from the China Food and Drug Administration (CFDA) for their proprietary cell and tissue preservation media kits respectively, in accordance with the new CFDA regulations announced on June 1, 2015. The certified kits enable long-term preservation and long distance shipment of cells and tissue, without requiring cryopreservation (freezing) from and to the point of care for ready applications by physicians. This facilitates centralized processing and supply of autologous cell therapies under CBMG’s Vertically Integrated Cell Manufacturing System (VICMS).
CBMG Added to the Russell 3000 Index: CBMG was selected for inclusion into the Russell 3000 Index (RUA) with automatic inclusion in the small-cap Russell 2000 Index (RUT) effective June 26, 2015. The Russell 3000 Index is weighted by market capitalization and consists of the 3,000 largest U.S.-traded stocks by objective, market-capitalization rankings and style attributes. As a result, CBMG is automatically included in the small-cap Russell 2000 Index as well as the appropriate growth and value style indexes. Investors should note that the Russell indexes are widely used by investment managers and institutional investors for index funds and as benchmarks for active investment strategies.
RECENT CHINA AND SECTOR EVENTS:
On August 13, 2015, Merck (NYSE: MRK Not Rated) and The University of Texas MD Anderson Cancer Center announced they entered into a strategic clinical research collaboration to evaluate Merck’s anti-PD-1 therapy, KEYTRUDA® (pembrolizumab), in combination with other treatments, such as chemotherapy, radiation therapy and/or novel antitumor medicines. Under the terms of the agreement, collaborative studies will be conducted in the following tumor types: gastroesophageal adenocarcinoma, pancreatic adenocarcinoma, and hepatocellular carcinoma over the three year period of the collaboration. The first studies are scheduled to start enrolling later this year. Additional details at: http://www.mercknewsroom.com/news-release/oncology-newsroom/merck-and-md-anderson-cancer-center-announce-strategic-immuno-oncolog
On July 29, 2015, Merck (NYSE: MRK Not Rated) announced they will acquire cCAM Biotherapeutics (private) for $95M in upfront cash and up to $510M in milestone payments. cCAM Biotherapeutics’ lead pipeline candidate is CM-24, a monoclonal antibody (MAb) targeting the immune checkpoint protein CEACAM1 currently in a Phase I trial for advanced or recurrent malignancies, including melanoma, non-small-cell lung, bladder, gastric, colorectal, and ovarian cancers. Additional details at: http://www.mercknewsroom.com/news-release/oncology-newsroom/merck-enhances-immuno-oncology-portfolio-acquisition-ccam-biotherapeu
On July 28, 2015, Regeneron (Nasdaq: REGN Not Rated) and Sanofi (NYSE: SNY Not Rated) entered into a global collaboration agreement for new antibody cancer treatments in immuno-oncology including the anti-PD-1 checkpoint inhibitor REGN2810 currently in a Phase I trial. Sanofi paid $640M upfront and the companies will invest a combined $1B through proof of concept development of monotherapy and novel combinations of immuno-oncology antibody candidates to be funded by Regeneron for $250M and Sanofi for $750M. The companies have also committed to fund an additional $325M each for development of REGN2810. In addition, Sanofi will pay Regeneron a one-time milestone of $375M in the event that sales of an anti-PD-1 product and any other collaboration antibody sold for use in combination with an anti-PD-1 product exceed, in the aggregate, $2B in any consecutive 12-month period. Finally, the two companies have agreed to re-allocate $75M over three years for immuno-oncology antibodies from Sanofi’s $160M annual contribution to their existing antibody collaboration, which otherwise continues as announced in November 2009. Beyond the committed funding, additional funding will be allocated as programs enter post-POC development. Additional details at: http://en.sanofi.com/NasdaQ_OMX/local/press_releases/sanofi_and_regeneron_launch_ma_1941594_28-07-2015!07_00_00.aspx
On July 24, 2015, the Chinese government approved the implementation of nationwide medical insurance for serious illness. Liang Wannian, vice-director of the medical reform office under the State Council and a senior official with China’s National Health and Family Planning Commission stated “By the end of this year, the medical insurance on serious illness will cover all residents, no matter in rural or urban areas, as long as they have taken part in the new rural cooperative medical care scheme or the urban medical care system. The burden on seriously ill patients will be effectively reduced, and by 2017, China will establish an efficient medical care scheme on serious illness as a supplement to medical assistance, disease emergency rescue, commercial medical care and social charity. All this will protect families from dramatic medical bills and improve the fairness of medical care.” The full transcript of the briefing in English can be accessed at http://english.gov.cn/news/policy_briefings/2015/07/24/content_281475153432411.htm
On June 29, 2015, Celgene (Nasdaq: CELG Not Rated) and Juno Therapeutics (Nasdaq: JUNO Not Rated) announced 10 year strategic collaboration for CAR-T and T Cell Receptor (TCR) technologies. Cellgene paid $150M in upfront cash and bought $850M of Juno common stock (approximately 10%) at a price of $93.00 (closing price was $46.30). For Juno-originated programs, Juno will be responsible for R&D in North America and retains commercialization rights there. Celgene will be responsible for development and commercialization in the rest of the world, and will pay Juno a royalty. For Celgene-originated programs under the collaboration they will share global costs and profits with 70% to Celgene and 30% to Juno. Celgene will lead global development and commercialization, subject to a Juno co-promote option in the US and certain EU territories. Additional details at http://ir.celgene.com/releasedetail.cfm?ReleaseID=919929
Download Full 41-Page Update Report with Important Disclosures: CBMG Update 08-17-15