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HTBX: Heat Biologics: Making an ImPACT on Cancer

By John Vandermosten, CFA




We are initiating coverage of Heat Biologics Inc (NASDAQ:HTBX) with a $5.00 price target based on our estimates for a 2023 launch of lead compound HS-110. The clinical-stage company is focused on activating T-cells with its off-the shelf ImPACT technology which activates CD8+ T-cells to induce immune responses. Its proprietary approach transforms live, allogenic cancer cells into osmotic pumps that secrete gp96 and tumor-associated peptides. The gp96 ferries the peptides to antigen presenting cells which activate the immune system. The cells used in the vaccine are fully allogenic and contain a broad variety of cancer-specific antigens that are able to stimulate T-cells against the cancer, providing an effective immunotherapy.

Heat is currently conducting an adaptive Phase II trial which is examining the use of HS-110 in combination with a checkpoint inhibitor and potentially other therapies in preparation for a Phase III registrational study. It will enroll up to 120 patients and target NSCLC, adenocarcinoma and squamous cell carcinoma with a readout in 2Q:19. The first ComPACT trial with HS-130 is planned to begin enrolling in 4Q:18 following an IND submission. HS-130 will also be addressing NSCLC. The 2017 acquisition of Pelican Therapeutics compliments Heat’s existing portfolio and augments adaptive immune responses using TNFRSF25 and other co-stimulators. We note that Pelican’s lead candidate, PTX-35, is currently in preclinical studies, and we anticipate an IND filing by 1Q:19.

Heat’s technology is differentiated from other cancer immunology approaches in that it employs a pan-antigen strategy to cancer immunology. This is in contrast to the single epitope/protein identifier used in many CAR-T and other immuno-oncology (IO) therapies which may allow for tumor immune escape and subsequent relapse. The lead compound’s ability to activate T-cells makes it a desirable partner for checkpoint inhibitors, which have shown higher efficacy in hot tumors.

Heat’s portfolio will additionally allow for a three vector approach to immuno-oncology. Their vaccine, HS-110 has the potential to activate T-cells and their co-stimulatory molecule, PTX-35, has the ability to increase the activity against cancer cells. These two agents combined with an approved checkpoint inhibitor can arrest several steps in the cancer-immunity cycle, thereby increasing the success rates of the multiple drug therapy.

On March 31, 2018, Heat held approximately $9 million in cash on its balance sheet. Modest amounts of capital have been raised over the last several years with public offerings, stock issuances and warrant exercises. The company currently holds no debt. Subsequent to the first quarter’s end, Heat closed a net $19 million capital raise. We expect Heat to consume approximately $1 million per month as it continues its Phase II trial work and seeks a partner for subsequent studies. In parallel, majority-owned Pelican will continue its work on PTX-35 with grant money sourced from the CPRIT. The company currently holds sufficient cash to continue operations into 2020.

Based on our timeline, we expect data to be presented from the Phase II NSCLC trial in 2018. Assuming a suitable partner is found, the Phase III should begin before the end of 2019, with results available by late 2020. Given its focus on development, Heat is expected to seek a partner to license and commercialize HS-110 worldwide. Lung cancer is the second most common cancer in men and women, and due to higher smoking rates overseas, is even more prevalent ex-US, providing opportunities for therapy around the globe.

There are multiple legs supporting our favorable thesis for Heat Biologics, including a well-defined mechanism of action which has shown evidence of being complementary to other in-development and existing therapies, preliminary evidence of efficacy for NSCLC and positive safety data for over 200 patients. Additionally, there is a treatment opportunity of ~1.5 million global diagnosed cases per year of NSCLC and low manufacturing costs compared to others in the class. These factors support strong market acceptance for this cancer vaccine which we believe has the potential to differentiate and enhance the performance of a checkpoint inhibitor.


Heat Biologics has identified a biologic therapy designated HS-110 (viagenpumatucel-L) that can stimulate the body’s adaptive immunity to eradicate lung cancer cells. The approach employs a vaccine that uses irradiated cancer cells which secrete a specific protein possessing a dual role. This protein, called gp96, can activate anti-cancer specific T cells and also serves as an adjuvant that enhances the immune response. Compelling data from combination work with checkpoint inhibitors may show increased efficacy compared to HS-110 monotherapy. Following anticipated favorable data from the currently active Phase II trial, we anticipate Phase III work will be conducted with a partner for non-small cell lung carcinoma using the combination of HS-110 and nivolumab. The firm also has two co-stimulators in the pipeline identified as PTX-35 and PTX-15 that were added via the acquisition of Pelican Therapeutics.

HS-110 is an irradiated lung cancer cell line that has been genetically modified using the company’s ImPACT technology platform. The modifications allow the cell to secrete a specific heat shock protein (HSP) known as gp96, which transports protein fragments (peptides) into the extracellular space where they engage antigen presenting cells to activate via innate immune mechanisms, thereby stimulating adaptive immunity through MHC class I antigen cross presentation.

Current cancer therapies are only modestly effective in NSCLC and many of the more advanced stages of this cancer fail to respond to initial treatment. First-line treatment for NSCLC recently shifted to checkpoint inhibitors; however, most patients still do not respond. Treatment may also include surgery followed by chemo- and radiotherapy, which is also insufficient as the disease progresses. Poor success rates highlight the need for additional approaches. There are a number of other immunotherapy programs in development for NSCLC, including checkpoint inhibitors, angiogenesis inhibitors, EGFR inhibitors, and others. However, they are only effective in a minority of the population treated or tumors develop resistance to the therapy. None of them have provided a dramatic improvement over existing therapies, and it is expected that many years of trial work will be required before uncertain results are generated from competing approaches. In contrast to other immunostimulants which seek a single identifying protein in cancer cells, HS-110 employs a pan-antigen approach which targets multiple uniquely identifiable proteins for cancer cells. Based on our research, we believe the addressable market for HS-110 in NSCLC is over 175,000 patients per year in the United States and a greater number outside the United States due both to a larger population and higher incidence of smoking. HS-110 possesses a favorable safety profile based on the low incidence of adverse effects in the previous Phase I trials suggesting greater patient uptake.

The agent’s promising results support pricing the drug in line with other immune-oncology agents. Many of these therapies present an average cost of above $100 thousand per course of treatment in the United States. Our forecasts maintain a conservative view, and anticipate a discount to these levels that is expected to capture market share. We make further reductions for regions ex-US to reflect relative prices in these economic areas.

While our target price is generated based solely on success in NSCLC, there may be additional cancer indications that can be addressed with the ImPACT or ComPACT platforms and other candidates in Heat’s portfolio that may eventually generate revenues. Our analysis does not reflect the benefit of participation in an expedited program by the FDA and assumes a Phase III trial will be required before HS-110 is approved.

Key reasons to own Heat Biologic’s shares:

‣ Compelling preclinical and clinical data supportive of effective mechanism of action
‣ Differentiated approach that employs multiple proteins for cancer cell identification
‣ Evidence of synergy with checkpoint inhibitors
‣ May address critical need for complementary therapies in NSCLC
‣ Pipeline of additional co-stimulatory assets complementary to HS-110
‣ Favorable drug safety profile with minimal adverse events
‣ Biologic eligible for 12 years of exclusivity in United States
‣ Global rights to intellectual property
‣ Manufacturing process produces high yields at low cost, in contrast to other biologics

In the following sections we describe the mechanism of action for HS-110. We also discuss HS-110’s clinical data and the design of the Phase II trial, which we anticipate will be followed by a Phase III trial conducted in conjunction with a partner. We anticipate initial Phase II data to be shared with potential suitors and regulatory agencies over the next year in order to attract capital, gain attention from large pharmaceutical players focused on the cancer space and develop an effective path forward. HS-110 may help revolutionize cancer therapy by providing a vaccine-based agent that stimulates a cancer patients’ immune system, bringing to bear the innate and adaptive systems to clear the body of this disease.

Cancer Vaccines

A vaccine is a biological agent that stimulates the body’s adaptive immune system to identify a particular disease, destroy it and recognize and eliminate similar threats in the future. Vaccines can be prophylactic similar to the flu shot or they can be therapeutic and attempt to remediate an existing health problem. Cancer vaccines have a similar profile and are used to either prevent a cancer from developing, such as Gardasil for human papillomavirus, or to treat existing cancer, such as Sipuleucel-T for prostate cancer. Vaccines help boost and stimulate the immune system to protect the body against infectious agents and viruses. The body’s adaptive immune system is able to recognize the antigens that are present in the infectious agent and remember them in case of future attacks on the body. This ability to recognize on subsequent exposure is the durable benefit provided by the vaccine as it contains the unique identifiers, or antigens, that are present in invading bacteria, viruses or abnormal cells.

HS-110 (viagenpumatucel-L)

HS-110 (viagenpumatucel-L) is a cancer vaccine derived from NSCLC immortalized cell lines that secrete cancer-specific antigens via gp96, awakening the adaptive immune system to recognize cancer cells and attack them. The biological agent is sourced from an immortalized cell line and contains numerous antigens that are also present in NSCLC tumor cells. The agent is also allogenic, and therefore does not require samples from the patient to develop the therapy. This is in contrast to the well-known CAR-T and other immuno-oncology approaches which require the patient’s own cells and significant time and cost for personalized processing.


Gp96 is a heat shock protein (HSP) responsible for chaperoning proteins, translated by mRNA, as they fold into their final forms. HSPs are produced by cells that are under stress, and may be more accurately described as cellular stress proteins. They were first identified when Italian geneticist, Ferruccio Ritossa, was exposing fruit fly chromosomes to high, but non-lethal temperatures. This led to further research which identified HSPs as molecular chaperones important for proper protein folding and the intracellular movement of proteins. HSPs are expressed in all eukaryotic and prokaryotic species and contribute to the assembly, stabilization, folding and translocation of proteins.

In a healthy cell, gp96 is tethered to the endoplasmic reticulum with a KDEL leash and in this location it comes into contact with almost all proteins and peptides that are present in a cell, including any viruses or intracellular parasites that may be present. Gp96 also may chaperone tumor-associated antigens expressed by tumor cells. When a cell undergoes necrosis, due to infection, trauma or numerous other factors not including apoptosis, the KDEL leash is severed and gp96 and its chaperoned peptides are released into the extracellular environment. The receptor for gp96 is CD91, also known as the scavenger receptor which allows dendritic cells (DCs) to recognize the HSP. After the DC absorbs the proteins, it is dissociated from gp96 and is then cross-presented via MHC I CD8+ T-cells. Gp96 also functions as an adjuvant, stimulating the release of cytokines and chemokines providing a molecular warning signal when necrotic cell death occurs and helping identify released peptides as potential threats thereby generating a powerful immune response.


The ImPACT (immune pan-antigen cytotoxic therapy) technology is used to generate gp96 secreting cells from an irradiated immortalized cell line. The technology deletes the tether that attaches gp96 to the cell’s endoplasmic reticulum and allows the heat shock protein to transport associated antigens out of the cell. These peptides represent cancer antigens that exist in tumors and are recognized by the patient’s immune system. ImPACT engages the body’s natural molecular warning system that is specific to CD8+ cytotoxic T-cell immune responses. ImPACT differentiates itself from other immunotherapies in that it is an off-the-shelf approach that does not require any material from the patient. The approach also employs a plurality of unique proteins that identify a specific cancer, reducing the potential for immune escape through mutation. The therapy is specific to CD8+ T-cells and is able to stimulate a response at normal levels of antigen.

View Exhibit I - Comparison of ImPACT with Other Immunotherapies

ComPACT (HS-130)

ComPACT (combination pan-antigen cytotoxic therapy), also called HS-130, is a next generation ImPACT therapy that combines gp96 with the T-cell co-stimulator OX40L-Fc, which are both secreted from the same cell. ComPACT can stimulate greater expansion of CD8+ T-cells and enhance the development of CD8+ T cell memory. The therapy is injected intradermally and taken up by the immune system similar to the ImPACT process. When the cancer antigens are presented to the T-cell via the MHC complex, OX40L-Fc binds with the OX40 receptors on the T-cell to further stimulate the response. The T-cells then move to the tumor area and eradicate the cancer cells.

As compared to ImPACT, in preclinical models, ComPACT stimulates higher frequency proliferation of antigen-specific CD8+ T-cells. ComPACT also demonstrates greater antigen specificity while avoiding off-target proliferation and systemic inflammatory cytokine stimulation as compared to OX40 agonist monoclonal antibodies. It is also contained in a simple package that contains both the HSP and the costimulatory agent and can be used with other immunotherapy approaches such as checkpoint inhibitors.

Non-small Cell Lung Carcinoma (NSCLC)

According to the American Cancer Society, lung cancer is the second most common cancer in the United States with an estimated 234,000 new cases diagnosed in 2018, which represents about 13% of all cancer diagnoses. While the incidence of lung cancer has fallen over the last two decades due to a decline in smoking habits, it still accounts for one in four cancer deaths, or about 154,000 in 2018. The majority of lung cancer cases are either small cell, which makes up about 13% of the total or non-small cell, which is about 84% of the total. First-line treatment for early-stage NSCLC has historically been surgery followed by chemotherapy and radiation therapy. In more advanced stages, a patient will receive chemotherapy with targeted drugs and in recent years more and more are receiving immunotherapy.

View Exhibit II - Heat Biologics Pipeline


HS-110 has shown early efficacy in activating T-cells to recognize tumor cells, evidence of synergies in conjunction with checkpoint inhibitors and co-stimulators in NSCLC and has a record of safety in 200 patients that have been treated in several trials. Based on the structure of the Phase II, HS-110 will pursue a Phase III registrational trial which we anticipate will provide topline data in 2022. NSCLC is an immense market that may represent as many as 175,000 cases in the US and a multiple of that size beyond its borders. Based on the initial data generated in the Phase II trial, Heat is in a strong negotiating position with the multitude of checkpoint inhibitors that require complementary therapies. With the higher response rate from patients with hot tumors, and HS-110’s ability to stimulate T-cells, the drug is in a position to complement an established company’s portfolio.

In summary, we believe that if HS-110 is able to continue to generate positive data in combination therapy for NSCLC, the shares are undervalued relative to their potential. While our valution only accounts for sales of HS-110, the company has other candidates in development that could yield value as great as HS-110. Based on our analysis and forecasts, we initiate Heat Biologics with a target price of $5.00.

*Please see our full initiation report above for more detailed discussion of the company, citations, pre-clinical and clinical trials and our valuation assumptions and methodology.

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