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Recent Sell-Off in Jounce therapeutics’ (JNCE) Stock Is Unwarranted

Written by Dan Cohen

In the wake of recently revealed abstracts from the 2018 ASCO meeting, Jounce therapeutics (NASDAQ:JNCE) stock price recently took a significant haircut, but was the drop justified? At first glance the numbers are seemingly unimpressive;

JTX-2011 (as a single agent) in Gastric Cancer (GC) 1/7 PR (14.2%),

JTX-2011 with BristolMyers Squibb’s (NYSE: BMY) Opdivo in GC 2/19 PR (10.5%)

and 2/19 SD (10.5%), and

JTX-2011 with Opdivo in Triple Negative Breast Cancer (TNBC) 1/15 PR (6.7%). However, the story may not end here.

There are a few factors we think that investors should take into account when analyzing this dataset and its relevance to Jounce’s future in IO:

  1. The data presented was only a 9-week (2 treatment cycle) follow-up which is a limited duration to be examining responders.
  2. GC and TNBC both have extremely poor single agent activity for PD-1/L1 targetted agents. Gastric hovers around 12-13% and TNBC in the single digits.
  3. This was an extremely heavily pre-treated population which came off of multiple failures. Following Merck’s Keytruda approval in GC as of September 2017, Jounce has elected to include PD-1 refractory patients in this cohort.
  4. ICOS has a larger likelihood of success in HNSCC based on the immune profile
  5. The company has a pending trial to be initiated in CTLA-4 combination, which provides a better mechanistic rationale than PD-1

At the ASCO oral presentation in early June, Jounce will be providing a more updated data set at least as of April, which should provide a more meaningful follow-up period. This is important as JTX-2011 is designed to hit the ICOS pathway, which is expressed on both T-effector and T-regulatory cells. The goal of the therapy is to tip the balance between these two subtypes of T-cells towards the effector cells by depleting T-regs through antibody activity (ADCC) and encouraging growth of T-effector cells which express ICOS.

Generally speaking, T-effectors which have significant ICOS expression intratumorally when they are antigen experienced. That is when they have learned the target but their growth and communication pathways are blunted by immunosuppressive forces. When exposed to JTX-2011 these effector cells should grow in population and thus differentiate into memory subtypes to generate a deep response over time.

Considering the two tumor types which were revealed are among the most immunologically “cold”, it’s reasonable to assume that reheating the tumor and developing a memory against the target may take some time. Especially given that over half of all patients in each of these cohorts had at least 3 prior therapies. In GC, this may have included PD-1 thus making this population even harder to treat. Interestingly 4 out 17 patients evaluable for bio-markering showed an increase in ICOS expression over baseline and none of these patients experienced progression events.

Head and Neck Cancer may provide a more compelling opportunity for this mechanism of action, despite the fact that all patients in this cohort are PD-1 refracted. The  response rate in nivolumab-treated HNSCC patients was 10.9% in cetuximab refractory with a median OS of 6.9 months, leaving a significant amount of room for improvement. Interestingly HNSCC are among the most immune infiltrated tumors, but also have the highest ratio of T-regulatory to T-effector cells.

This suggests that perhaps much of the resistance of this tumor type to a PD-1 agent could relate to the suppressive factors from regulatory cells.  Further HNSCC harbors a significant mature NK cell population, which drives the T-regulatory depletion component of JTX-2011. Given the large infiltrate and unfavorable T-reg/effector ratio, this tumor type in particular has high odds of success in our view.

In addition, data from NSCLC will be reported, which also boasts a large NK and T-reg expression. Much of the focus around PD-1 development has been in the lung cancer space so this will be an important area to watch. Interestingly, a prospective study found that alterations in the ICOS gene correlated with survival in this setting.

Furthermore, many trials have been conducted involving CTLA-4 combinations with PD-1 both in NSCLC and HNSCC – these are patients that can enroll into this trial.

Considering that CTLA-4 treatment increases ICOS expression, more of these patients are likely to enroll as the company is aiming to include more ICOS hi. It’s possible that ICOS can overcome the resistance to CTLA-4 agents like Ipilimumab and the theory will be put to the test in a trial which will start mid-year.

Given all these factors, it’s hard for us to conclude Jounce is out of the game. The company has discussed with analysts the fact that many patients will have made onto the next scan. We look forward in particular to both updates for the GC and TNBC cohorts as well as a first look into NSCLC and HNSCC.


Disclosure: Long JNCE.

Disclaimer: This article/video 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.

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