Written by Dan Cohen and Scott Matusow
At Stockmatusow, our primary focus is finding clinical stage biotech companies that have the potential to provide shareholders with high/strong share price appreciation, especially in the mid to longer term time frame. Late last year, we identified one such company that fit our bill, Calithera Biosciences (NASDAQ:CALA). Since that time. Calithera’s stock price has risen over 400%, reaching as high as 500% in a very short time frame. We think Calithera has the potential to future valuate into the mid-cap range within the next 3 years or so, provided that it continues to move forward with its platform, bio-markering, and potential myeloid-derived suppressor cells (MDSC) expression being suppressed by CB-839 in collaboration with Bristol-Myers Squibb (NYSE:BMY).
We believe we have identified another company with the potential for at least a similar short to mid-term stock move in addition to having very strong, yet speculative long-term value.
Our new pick is GlycoMimetics (NASDAQ:GLYC) which focuses on the discovery and development of glycomimetic drugs to address unmet medical needs resulting from diseases in the United States and abroad.
The primary focus for GlycoMimetics and its shareholders in the near term is a pending data update for GMI-1271 in Acute Myeloid Leukemia (AML) upcoming May 18 th, 2017. GMI-1271 is a novel E-selectin (CD62E) antagonist built on the company proprietary glycomimetic platform designed to block interactions between tumor cells and endothelial cells. The term “glycomimetics” is a reference to a class of synthetic molecules which mimic specific carbohydrate structures. The company has designed these molecules to have an enhanced pharmacokinetic/pharmacodynamic (PK/PD) profile enabling them to behave more as traditional therapeutics – a potentially compelling alternative to antibody therapy.
Much like our last focus pick Calithera Biosciences, GlycoMimetics is designing its oncology targets with the intent to modulate tumor microenvironment (TME) and re-sensitize neoplasms to therapy. Every year, more than 12,000 new cases of AML are reported with <10% of these achieving disease-free survival (DFS) with the majority of patients (approx. 80%) relapsing despite initial remission.
So, there is a clear need for therapy which can improve durability and deepness of initial responses. It was recently discovered that leukemia cells can induce endothelial cell activation, causing inflammation: This inflammation enables the tumor cells to bind to endothelial cells via E-selectin, which keeps it hidden away in a dormant state and unaffected by chemotherapy.
Additionally, adhesion of myeloblasts through E-selectin was found to enhance resistance through activation of the wnt pathway
Through administration of GMI-1271, tumor cells are unable to hide within the bone marrows and are mobilized into the peripheral blood, making them more sensitive to therapy. We can think of this drug as a street sweeper, pulling all the micro metastases out into the open and exposing them. Further blocking this interaction lowers overall inflammation and potential thrombosis, a major side effect to AML treatment. As a single agent it is not anticipated that this would be efficacious, but as a tack onto a chemotherapy regimen it has significant potential.
So far, the company has demonstrated a 73% CR (8/11) rate when combined with the 7+3 standard of care (cytarabine +daunorubicin) in the front line setting of AML in elderly patients. Notably, none of these patients had incomplete recovery. This compares well to historical controls in the mid 40% range for 7+3 therapy alone. To date, in the relapsed/refractory (r/r) patients we have seen a composite response rate of 45% (15/33) between the Phase 1 and Phase 2 trials for GMI-1271+Mitoxantrone, Etoposide, and Cytarabine (MEC). This also compares well historically against MEC response rates in r/r populations in the 20% range.
Overall survival for this r/r population is estimated at around 6.8 months. The median follow-up for the phase 1 component of the study was 163 days as of The American Society of Hematology (ASH) and median overall survival (OS) and DFS have yet to be reached. The company will present updated data on both the treatment naive and the r/r patients in early June at the American Society of Clinical Oncology (ASCO) and the European Hematology Association (EHA) meetings in June.
If the company continues to demonstrate deep and durable remissions with mortality benefit at the follow-up in upcoming meetings, we see significant upside to the company’s share price which are trading at an overly low valuation relative to its potential.
Such data would further validate the company’s approach to block cancer cells from hiding in bone marrow. Considering how aggressive AML is, success here means increased value can be afforded (due to bio-markers) to its earlier exploratory work in breast cancer and multiple myeloma models.
What we expect here is for the company to announce that it’s seeing continuing positive signals from its Phase 2 trial in which it can produce bio-markers to use towards building its earlier stage pipeline which focuses on Multiple Myeloma and other oncological (and potentially non-oncological) indications. We also believe the stock price will run up (offering run-up) in a similar manner that we saw with Calithera in which the company will likely engage in an equity raise.
Calithera’s stock price rose from the $2.50 range to as high as nearly $15, before an equity raise at $10.25 commenced. GlycoMimetics currently has roughly 23M shares outstanding, much like Calithera which also had a similar share count. Currently, Calithera’s outstanding share count sits around 35M. We think GlycoMimetics share count after an equity raise will come in a bit lower – about $30M or so.
Additionally, the company already has a partnership with Pfizer (NYSE:PFE) with its drug GMI-1070 (rivipansel), which is designed to treat vaso-occlusive crisis (VOC) in patients hospitalized with sickle cell disease who are six years of age or older.
Phase 3 top-line results for rivipansel are expected sometime in H1′ 2018, likely closer to the middle of 2018 which if positive, would give the company a further equity boost from which to build its pipeline from. In addition, the company has likely been able to pull key bio-markering data from its partnership with Pfizer.
We also have a positive view on GlycoMimetics management team here which is led by Rachael King, who was also an Executive in Residence at New Enterprise Associates (NEA), one of the nation’s leading venture capital firms – NEA holds 37% of GlycoMimetic stock (NEA has held the same position from before the IPO).
We feel NEA being heavy here is a potential positive in terms of giving the company additional leverage in potentially filing for, and receiving an Accelerated Approval (AA) for GMI-1271. Scott Gottlieb, M.D. who was recently nominated to head the U.S Food and Drug Administration (FDA) has been an NEA venture partner since 2007.
Obviously, the company will have to confirm its data to get an AA, but with Dr. Gottlieb heading the FDA, and NEA’s strong investment here, we speculate this as a potential positive.
Considering the company’s current market cap sits under $150M, we see high upside potential here in the short. mid, and long-term view. The bullish longer term view is very speculative because this is a clinical-stage biotech, as much as we have identified the potential here and likeliness of success, unexpected results can happen with a clinical-stage biotech.
However, we are seeing GlycoMimetics taking the correct approach notwithstanding its platform is highly differentiated/non-toxic and early data is very positive. We believe the company is not currently fairly valued when considering the overall picture here, and should be valuated closer to $500M when compared to its nearest peers (which is hard to do as the company has a unique platform).
It’s also worth noting that Celator Pharma improved on the 7+3 standard of care and was also extremely under covered and under speculation valued before being acquired by Jazz Pharma (NASDAQ:JAZZ) in May of 2016 for over $30 a share. Before Celator’s proof of successful improvement on the standard of care, the stock traded near $1 a share. GlycoMimetic’s platform in this indication if proven successful, can certainly see this kind of valuation and beyond.
If we consider the company’s additional assets that are being designed/bio-markered to treat a wide array of diseases in the pre-clinical and clinical-stage, and taking into account Celator’s success was only in the frontline setting whereas GM-1271 addresses every line of treatment, GlycoMimetics risk/reward at its current valuation is attractive to us.
Needless to say, it’s early in the game for GlycoMimetics so longer term risk is high. However, we think the GMI-1271 asset has a 75% chance of clinical trial success, so we are bullish of its chances from here moving forward.
We are long $GLYC and $CALA
Disclaimer: This article is intended for informational and entertainment use only, and should not be construed as professional investment advice. They are my opinions only. Trading stocks is risky — always be sure to know and understand your risk tolerance. You can incur substantial financial losses in any trade or investment. Always do your own due diligence before buying and selling any stock, and/or consult with a licensed financial adviser.