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CKPT: A Smokin’ Opportunity in PD-L1 Therapy and Beyond

12/06/2017


NASDAQ:CKPT

Checkpoint Therapeutics (NASDAQ:CKPT) boasts an impressive portfolio of immuno-oncology and anti-cancer agents that have the potential for approvals as both mono- and combination therapies.  Checkpoint has six compounds in development, two of which are in active clinical trials including the anti-PD-L1 checkpoint inhibitor (CK-301) for multiple solid tumor cancers and EGFR inhibitor (CK-101) for lung cancer.  These two assets are being developed for global markets of $30 billion and $5 billion respectively.  Four other candidates are also moving through the pipeline and include a PARP inhibitor, BET inhibitor, anti-GITR and anti-CAIX; all of which have the potential to activate an immune system response or heat up the tumor microenvironment and enhance the performance of a checkpoint inhibitor in combination therapy.

 


Despite only being in Phase 1 clinical development, CK-301 may be the most exciting and valuable compound in Checkpoint’s pipeline since the class has shown not only impressive efficacy in monotherapy, but also in conjunction with other agents that are able to activate immune cells against a tumor.  CK-301 has the potential for broad applicability in many cancer types and also to work with other candidates being developed by Checkpoint Therapeutics.  We see a dominant reason why the deal market for the PD-1/L1 class accelerated in 2017 and is likely to maintain its velocity in 2018 and beyond.  Any big player in oncology needs a PD-1/L1 agent of their own as the backbone of combination therapy to be competitive in the oncology space.  Entering 2018, Checkpoint’s clinical-stage anti-PD-L1 will likely be on many companies’ radars.

3 in Clinical Trials and 3 in Development

Controlling shareholder Fortress Biotech (NASDAQ:FBIO) began sourcing Checkpoint’s pipeline starting in 2015.  A PD-L1 antibody and EGFR inhibitor were licensed as early stage assets from Dana Farber Cancer Institute and NeuPharma.  Checkpoint spent most of 2016 and 2017 developing CK-301, refining chemistry, manufacturing and control practices and conducting in vivo safety studies in preparation for the launch of human clinical trials.  On October 5th of this year, Checkpoint announced the start of its first-in-human Phase I study for CK-301, a fully human monoclonal antibody that binds to Programmed Death-Ligand 1 (PD-L1) and blocks its interaction with the Programmed Death-1 (PD-1) and B7.1 receptors.  We discuss the details of the program in an earlier article.  The open label study is executing an ascending dose evaluation in checkpoint-naïve patients with selected recurrent or metastatic cancers where efficacy is anticipated.  Following dose escalation, the trial will expand into additional cohorts to further determine the safety and efficacy of the biologic.  

Coming up in 1Q:18, CK-301 will complete dose escalation and we anticipate an update from the company at that time.  We expect that during the summer and fall next year, Checkpoint will prepare its data and interact with the FDA in time for a late 2018 launch of a Phase III trial for its anti-PD-L1.  In pre-clinical studies, CK-301 has shown broad similarity with other FDA approved anti-PD-L1s atezolizumab, avelumab and durvalumab.  With a non-small cell lung cancer (NSCLC) candidate already in the clinic, we think Checkpoint has a better than even chance of targeting the lung cancer space in advanced clinical trials of CK-301.

 
Checkpoint Therapeutics entered 2017 with a Phase I/II trial underway for its third-generation, irreversible kinase inhibitor, CK-101, targeting selective mutations of EGFR which we discuss in an earlier article.  The ongoing clinical trial will determine an optimal dose in the Phase I work and confirm safety and efficacy in Phase II.  We expect to see updates for CK-101 in the first half of 2018 and completion of the study before the end of the year.  In September, the FDA granted Orphan Drug Designation to CK-101 in EGFR mutation-positive NSCLC.  This designation should confer several benefits including tax incentives, smaller trial populations and greater pricing power when eventually commercialized.

Phase II for CK-101 will enroll about 60 EGFR mutation-positive NSCLC patients and seek an objective response rate as the primary endpoint.  For the Phase III trial, Checkpoint will use a similar study design as that used for Tagrisso, AstraZeneca’s third generation irreversible kinase inhibitor for NSCLC which was initially approved in late 2015.  Based on current progress, we anticipate a Phase III trial for CK-101 beginning around year-end 2018.  

In December 2015, Checkpoint obtained the right to develop and commercialize a poly ADP-ribose polymerase (PARP) inhibitor from Teva designated CK-102.  The molecule had already been subject to three Phase I studies both by itself and in conjunction with chemotherapy agents; however, the original formulation suffered from poor absorption and high variability.  Checkpoint is reformulating CK-102 to improve its bioavailability and prepare it for a Phase Ib study.  Plans are to evaluate the agent in combination with a checkpoint inhibitor in BRCA-mutant patients to generate safety and efficacy data to support larger combination studies.

CK-103, the Bromodomain Extra Terminal (BET) compound, is expected to generate an IND by the end of 1Q:18.  CK-302, the anti-GITR (glucocorticoid-induced tumor necrosis factor receptor related protein) is currently in IND-enabling work and has a soft target of IND submission by year-end 2018.  Both of these agents will be broadly pursuing multiple forms of cancer in early clinical studies.  The last constituent is an anti-CAIX (carbonic anhydrase 9) which is intended for renal cell carcinoma and may advance its IND in 2019.  All of the targeted anti-cancer agents and CK-302 have the potential to be used in conjunction with the company’s in-house PD-L1 checkpoint inhibitor.

 


In addition to specific work to advance candidates, Checkpoint has achieved other milestones in 2017.  In February, the USPTO issued a composition of matter patent that covers CK-101 and provides protection through 2034.  The patent was originally submitted by NeuPharma and falls under the license agreement that exists between it and the company.

In the scientific meetings sphere, Checkpoint showcased its data for both CK-301 and CK-101 at the American Association for Cancer Research (AACR) annual meeting in the beginning of April.  The posters and presentations highlighted the key conclusions for each.  CK-301 was shown to have similar pre-clinical binding and activity as other FDA approved anti-PD-L1s and also has the potential to induce antibody-dependent cell-mediated cytotoxicity.  CK-101 was shown as a potent mutant-selective inhibitor of both the activating and resistance EGFR mutations with minimal inhibitory potency toward wild-type EGFR.  

Checkpoint (CKPT) began trading on the OTCQX in December 2016, intending to list on the NASDAQ as soon as feasible, with the goal of improving trading volumes, reputation and visibility for the company.  In late June of this year, the company announced the successful listing and commencement of trading on the NASDAQ Stock Market.  Prior to the change, average volume was approximately 400 shares per day, rising to an average of over 20,000 shares per day following the NASDAQ listing.  The increased liquidity is expected to attract larger shareholders who require sufficient trading volume to implement their positions. 

Checkpoint Inhibitors

In a previous article, we highlighted several recent transactions in the PD-1/L1 checkpoint inhibitor space.  Some of the deals have reached hundreds of millions of dollars in upfronts with the potential to reach billions of dollars in milestones and royalties if the programs continue to succeed.  The value of these programs is attributable to the many successes we have seen so far in this class and the promise they hold to work in conjunction with other therapies.

The FDA has granted approvals for checkpoint inhibitors in melanoma, bladder cancer, NSCLC, renal cell carcinoma and other cancer types since the first checkpoint inhibitor was approved in 2011.  The advent of this class of immunotherapy has dramatically changed the therapeutic landscape in cancer treatment.  Approximately 20% of patients given a PD-1 / PD-L1 inhibitor will see a durable response especially in the inflamed tumor phenotype.  This success rate has the potential to rise substantially when checkpoints are used in conjunction with other agents.  

 


Now that there is better information on what types of tumors and conditions are conducive to checkpoint inhibitor therapy, there is a strategic and economic argument to be made for unencumbered access to it.  Pre-clinical research has shown potential synergy between checkpoints and PARP inhibitors, oncolytic viruses, IDO inhibitors, EGFR inhibitors and targets including LAG-3, GITR, and TIM-3 among others.  Checkpoint inhibitors are increasingly recognized as a backbone therapy in two and even three drug combinations, illustrating the importance of a company having its own checkpoint inhibitor.  Checkpoint Therapeutics is fortunate to have not only an anti-PD-L1 in its pipeline, but also some of the emerging classes that may pair well with it.

Checkpoint Therapy Deals

Over the last several years there have been a number of transactions in the anti-PD-1 and anti-PD-L1 space, with several large deals in 2017 that clearly indicate the tremendous value of Checkpoint’s lead anti-PD-L1 asset, CK-301.  This past October, Incyte (NASDAQ:INCY) signed a $900 million deal to obtain rights to MacroGenics’ (NASDAQ:MGNX) anti-PD-1, MGA012.  The transaction with MacroGenics is probably the most relevant to currently value Checkpoint Therapeutics’ anti-PD-L1 asset given its early Phase I stage of development.  The MacroGenics' transaction is also remarkable in that it allows the company to retain the development rights to MGA012 in combination with assets in its own pipeline for combination therapy.

In July of this year Celgene (NASDAQ:CELG) announced that it had acquired the ex-Asia, solid tumor indication rights to BeiGene, Ltd’s (NASDAQ:BGNE) Phase II PD-1 inhibitor, BGB-A317, for $263 million in upfront license fees, a $150 million equity investment and $980 million in potential milestones, along with a robust royalty on net sales.  The deal also gives BeiGene the rights to develop Celgene’s China cancer portfolio.  Celgene also entered into an agreement with AstraZeneca to develop their PD-L1 inhibitor Imfinzi (durvalumab) in serious blood cancers.  In this 2015 deal, Celgene paid an upfront $450 million for commercialization and royalty rights.  The FDA granted accelerated approval to Imfinzi in May 2017 for bladder cancer.  The drug is also in Phase III trials for a variety of other cancers.

In November 2014, Pfizer (NYSE:PFE) entered into an agreement with Merck KGaA (FRA:MRK) to develop Bavencio (avelumab) when the compound was in Phase I clinical studies.  Pfizer agreed to pay an upfront amount of $850 million plus milestones with a value up to almost $2 billion.  The FDA granted accelerated approval for Bavencio in bladder cancer and metastatic Merkel cell carcinoma so far in 2017 and the biologic is being investigated in at least 12 additional Phase III trials for other cancer indications.  

And on August 17 of this year, a deal took place between Arcus Biosciences (private) and the Chinese WuXi Biologics (HKG:2269).  Arcus paid $18.5 million in upfront payments plus may pay another ~$800 million in milestones to WuXi and their partner Harbin Gloria Pharmaceuticals (SHE:002437) for a license to develop and commercialize GLS-010, an anti-PD-1 antibody currently in Phase I trials in China.  Additionally, Incyte’s 2015 payment of $25 million upfront and $770 million in potential milestones for Jiangsu Hengrui Medicine’s anti-PD-1 drug SHR-1210 is evidence of the broad interest in finding a checkpoint inhibitor to function as a backbone to other complementary therapies.  

Summary


Checkpoint Therapeutics is right in the center of the checkpoint inhibitor revolution.  Not only does the company have an anti-PD-L1 in clinical trials but they have the potential to pursue the next generation in combination therapy with their stable of targeted anti-cancer agents.  This approach recognizes the importance of heating up the tumor microenvironment with immune stimulators thereby enhancing the ability of checkpoint inhibitors to free immune cells to eradicate the tumor.  2017 was a productive year for Checkpoint with two candidates in active clinical trials and several others moving towards investigational new drug status.  2018 should see continued advances in the portfolio of compounds with clinical readouts for CK-101 and CK-301 to be followed by the commencement of Phase 3 registration studies, and IND submissions for several others.  The deluge of deals for PD-1/L1 checkpoint inhibitors around the globe provides a favorable backdrop to the efforts of this small company and indicates its potential valuation to others in the space.  We expect 2018 to be another exciting and likely transformational year for Checkpoint Therapeutics.

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