Cantargia — Excellent end to the year

On 2 December 2019, Cantargia reported interim data from the ongoing open-label, three-arm Phase IIa study with CAN04 in NSCLC and PC as monotherapy and in combination with first-line chemotherapies (Exhibit 2). The CANFOUR trial consists of two parts – Phase I and Phase IIa. The full Phase I data were presented at ASCO on 2 June 2019, which showed that CAN04 was generally safe and well tolerated. The ongoing Phase IIa study includes initial efficacy endpoints among others. The first results include:

The results showed the addition of CAN04 increased the response to treatment rates compared to historical efficacy rates of the same standard of care chemotherapy regimens. Reported historical response rates with the chemotherapy regimens used in the CANFOUR trial are 23% (PDAC; Von Hoff et al, 2013), 22–28% in first-line NSCLC (Schiller et al, 2002; Scagliotti et al, 2008). Also, the historical data showed more than a 90% reduction of CA19-9 was reported in 31% of PDAC patients after standard gemcitabine/abraxane therapy (Von Hoff et al, 2013).

Moreover, the pseudoprogression case is particularly interesting because it is a known phenomenon when treating patients with immunotherapies. It is defined as ‘a response to treatment after initial increase in volume of cancer lesions, due to the infiltration of tumoral tissue by immune cells’. Although the patient was still considered to have progressive disease during the last check, the pseudoprogression phenomenon after the administration of CAN04 would imply the immune system was activated. This is supportive to the expected mechanism of action of CAN04. In addition to direct cell killing via antibody-dependent cellular cytotoxicity, by inhibiting IL1RAP CAN04 blocks the IL-1 signalling pathway, which the tumour exploits as a defence strategy against immune system attack.

Overall, although the data are still at an early stage, the large margin in achieved ORs compared to historical controls provides some confidence in the hypothesis that CAN04 is synergistic with the SoC chemotherapy.

The recruitment to the PDAC arm is expected to be completed in early Q220. Cantargia reported somewhat slower than expected enrolment to the NSCLC arm. To address that, the company opened additional centres and recruitment is expected to be completed in early Q320. More response, biomarker and safety data will likely be released in 2020. In addition to the chemotherapy combination, the Phase IIa CANFOUR trial includes a monotherapy arm primarily analysing safety and biomarkers in patients with late-stage disease with results from different dose levels expected in H120. The key readouts (progression free survival and overall survival) from the combination arms are likely in 2021.

On 15 November 2019, Cantargia announced it is proceeding with plans to initiate a clinical trial in the US, which followed a positive pre-IND meeting with the FDA. Cantargia plans to file for the IND application in January 2020. The rationale to test CAN04 in combination with CPIs is based on several observations:

The trial design has not yet been confirmed, but preliminary to this will be a Phase Ib trial with CAN04 in combination with checkpoint inhibitors in three indications: NSCLC, head and neck squamous cancer (HNSC) and bladder cancer. These indications were selected because the tumours express IL1RAP and are relatively immunogenic, therefore suitable for treatment with CPIs. In addition, checkpoint inhibitor (Keytruda) is a standard therapy in these indications. The patients in the trial will be eligible if they have progressed on prior PD1/PDL-1 antibody therapy. (second-line positioning). Up to 18 patients are planned to be included in the trial. Endpoints will include typical safety evaluation, as well as exploratory biomarkers and initial efficacy. The trial could start in Q220.

In addition to its lead project CAN04, Cantargia and its collaborator Panorama Research worked together on the preclinical programme CANxx. CANxx is focused on the discovery of an antibody against IL1RAP that has the potential to treat autoimmune and inflammatory diseases with the involvement of three interleukin pathways (IL-1, IL-33 and IL-36). On 5 December 2019, Cantargia announced it had selected CAN10 for preclinical development. The project includes two different antibodies that show potential in targeting all three pathways. Cantargia expects to name the drug candidate later and, in case of favourable results, the Phase I trial could start in 2021.

Based on an extensive literature review Cantargia selected two indications on which to focus: systemic sclerosis and myocarditis. The rationale for selecting these indications is that all three interleukin pathways are involved. Both conditions can be described as orphan indications, so Cantargia could develop these projects on its own. In contrast, CAN10’s mechanism of action makes it a unique asset and we do not know of any other R&D projects in development that simultaneously target the three interleukins. From the perspective of competition, this makes it a potentially attractive in-licensing target for pharma companies in the anti-inflammatory drug development field.

To this end, US-based XBiotech announced on 7 December 2019 that Janssen (Johnson & Johnson) acquired its anti-IL-1alpha antibody bermekimab for $750m upfront and $600m in potential milestones payments. Initially, XBiotech tested bermekimab in oncology; however, results from Phase III trials in colorectal cancer were mixed and ultimately the antibody was repositioned for inflammatory diseases. XBiotech is running two mid-stage clinical trials with bermekimab for hidradenitis suppurativa and atopic dermatitis, but the company will be prohibited (for anti-competitive reasons) from entering dermatology again with new antibodies, presumably the area of interest for Janssen. Although it is still not clear what Janssen’s plans with bermekimab are, the deal terms suggest its interest in this pathway is very high.

Given its troubled past in oncology, the comeback that XBiotech has made in dermatology is remarkable. With CAN04 Cantargia does not target inflammatory diseases, but CAN10’s mechanism of action does overlap that of bermekimab. Theoretically, as we described in our initiation report, anti-IL1RAP antibodies (CAN10 and CAN04) would have a more profound downstream effect as they block the signalling via both IL-1alpha and IL-1beta receptors, as opposed to inhibiting only IL-1alpha (eg bermekimab) or IL-1beta (eg canakinumab, Novartis).

Another deal involving interleukin-based assets was announced on 9 December 2019, when Sanofi agreed to pay $2.5bn for Synthorx, a biotech company in California, US. Synthorx’s lead compound is THOR-707, a variant of IL-2. To our knowledge, there is no significant overlap between the downstream effects of IL-2 and the three interleukin pathways Cantargia is targeting (IL-1, IL-33 and IL-36). Therefore, this deal is not directly comparable. However, when taken together the XBiotech and Synthorx deals demonstrate pharma’s interest in immunotherapies exploiting interleukin pathways.

With its Q319 results, Cantargia reported an operating loss of SEK26.3m versus SEK21.4m in Q318. R&D costs in Q219 were SEK23.2m versus SEK16.7m in Q318, an increase due to the initiation of the larger Part 2 (Phase IIa) of the CANFOUR trial. We have adjusted our operating loss slightly to SEK101.1m and SEK114.1m for 2019 and 2020, from SEK94.9m and SEK117.8m, respectively. The reported cash position at end Q319 was SEK194.5m (including short-term investments).

Our updated valuation of Cantargia is higher at SEK2.94bn or SEK40.4/share versus SEK2.65bn or SEK36.4/share previously, as we slightly increased the success probability for CAN04 to reach the market to 18% from 15% to reflect the early positive interim data. The modest revision of our estimates and rolling our model forward were offset by the lower cash position. Potential catalysts for Cantargia’s share price in the near term include: