Cantargia — ‘Post-Novartis’ era has begun

Exhibit 1 summarises Novartis’s canakinumab in non-small cell lung cancer (NSCLC) programme. There are several trials ongoing that investigate canakinumab in virtually all settings, from the most advanced patients to those with early-stage cancer.

As a reminder, earlier this year Novartis reported that its Phase III CANOPY-2 trial in the most advanced NSCLC patients receiving second- or third-line treatment missed the primary endpoint. On 25 October 2021, the large pharma reported that its Phase III CANOPY-1 trial in first-line NSCLC did not meet primary co-endpoints of overall survival (OS) and progression-free survival (PFS) either.

However, Novartis pointed out that the CANOPY-1 data showed ‘potentially clinically meaningful improvements’ in both co-primary endpoints in pre-defined subgroups of patients based on the baseline inflammatory biomarker (high sensitivity C reactive protein, hsCRP), as well as ‘other biomarker-defined subgroups’ (the latter not defined). So, Novartis is implying that minimal signs of ongoing inflammation in the background could potentially be used as a biomarker to identify a more relevant subgroup of patients. This would make sense given the mechanism of action of canakinumab (anti-IL1β, which diminishes pro-inflammatory IL-1 signalling). If that turns out to be the case, Cantargia would also benefit because it could easily incorporate the biomarker. The CRP test is the most common inflammatory biomarker to evaluate an active infection used in the clinic (the hsCRP test simply measures much smaller amounts of the same protein in seemingly healthy persons; one is used to estimate the risk of heart disease for example).

No further details were released, but Novartis should present data at an upcoming medical meeting, albeit precise timing was not guided. It also confirmed that the other trials are ongoing. The next one in focus now is the ongoing Phase III CANOPY-A, which investigates canakinumab as an adjuvant therapy in stage II–III NSCLC after complete resection and adjuvant chemotherapy. The data from this trial are not expected before 2023. A Phase II CANOPY-N trial is investigating canakinumab in the even earlier neoadjuvant setting (before surgery).

The Novartis CANOPY programme with its multiple trials originates from observations from the Phase III CANTOS trial (historical details are discussed in our initiation report), which also investigated canakinumab, but in an unrelated cardiovascular indication, to establish the role of IL-1β inhibition in atherosclerosis. The unexpected finding that canakinumab reduced lung cancer incidence ultimately led Novartis to initiate the CANOPY programme. By design, all participants in that trial had to be free of previously diagnosed cancer, but that does not mean they were actually cancer-free on inclusion. Chances are, and this was c 10,000-patient trial, some of the patients already had a malignant process underway, but demonstrated no symptoms. Canakinumab then either reduced the development of cancer or reduced the rate of progression. Either way this was happening very early in the disease.

Earlier this year Novartis reported negative data from its Phase III CANOPY-2 trial, which had investigated canakinumab in the most advanced NSCLC (Exhibit 1). This setting and the patients in the original Phase III CANTOS study are on the opposite ends of the course of this disease. The more recent announcement is from the CANOPY-1 trial, which investigated canakinumab as a front-line treatment after surgery, but still in an advanced stage of lung cancer. And while the trial technically failed, knowing the historical perspective it makes sense that some efficacy has potentially been observed in a subset of patients, specifically in those with measurable chronic inflammation. The totality of Novartis data now points to even earlier settings, which is the reason behind the company’s determination to proceed with CANOPY-A and CANOPY-N trials, or the need for better control of IL-1 signalling, which is what Cantargia’s CAN04 provides.

IL-1 is a proinflammatory cytokine that exists in two forms: IL-1α and IL-1β. IL-1α and IL-1β are both ligands for IL-1R and through this receptor initiate the same signalling processes inside the cell. Canakinumab is an IL-1β monoclonal antibody and acts more upstream of Cantargia’s target IL1RAP. So, canakinumab blocks only one of two cytokines that activate the IL-1 receptor, while Cantargia’s CAN04 completely abrogates IL-1 signalling pathway. In addition, CAN04’s mechanism of action is not only inflammation modulation via IL1RAP, but also the antibody-dependent cellular cytotoxicity (ADCC), which directly causes cancer cell death.

Cantargia has recently released new preclinical data that clearly demonstrate the different effects of an anti-IL1RAP approach (CAN04) versus an anti-IL1β (canakinumab). The model used was mice with established subcutaneous MC38 tumours (colorectal cancer model), which were treated with docetaxel in combination with CAN04 or an anti-IL1β antibody. Data showed that CAN04 increased the effect of the chemotherapy docetaxel in tumour-bearing mice, which was not achieved by IL-1β blockade alone. Looking at cytokine level (in vitro data), it is known that some chemotherapeutic agents induce the malignant cells to produce IL-1α, which leads to tumour-promoting inflammation and may induce resistance to chemotherapy. CAN04, an IL-1RAP inhibitor, counteracts this defensive mechanism against chemotherapy, which is in sharp contrast to canakinumab’s more limited mechanism of action (anti-IL1β, so anti-IL1α remains intact).

Novartis started publishing trial data on patients starting with the most advanced setting and moving to earlier stages of the disease. So, there has been a period of negative sentiment weighing on Cantargia’s share price since early 2021 (admittedly, the share price more than doubled in late 2020 in the run-up period ahead of the Novartis CANOPY-2 readout). Because of the complicated history of canakinumab, we believe, the read-across to Cantargia’s CAN04 was misinterpreted by many. Novartis’s CANOPY studies will provide valuable information of how to position CAN04, but do not invalidate the IL-1 axis theory in cancer, in our view. The next update from Novartis is not due until 2023, so in the interim period the market will be judging Cantargia’s value based on its own news flow and data. Most recent updates in this regard are promising (details below) and the company is taking steps at the moment to significantly expand the data sets with more indications and more settings. This will provide definitive answers about CAN04’s potential.

Cantargia is completing its Phase IIa CANFOUR trial, which investigates CAN04 plus chemotherapy in first-line NSCLC and CAN04 plus chemotherapy in metastatic pancreatic cancer (PDAC) (Exhibit 2; more details on trial design in our previous report). The final data from the PDAC arm (n=36, of which 33 were evaluable) were released in May 2021. This was the first-line treatment setting with patients receiving a standard of care chemotherapy gemcitabine/nab-paclitaxel (around 50% of all PDAC patients receive it). Interim response data have been published previously and compared very well with historical control data. So, the positive outcome of this particular arm of the CANFOUR trial has already been mostly discounted. Still, the new efficacy details reported in May 2021 are promising. Median PFS in the PDAC arm was 7.8 months and the median OS at that time was 12.6 months. These data compare well with historical control data: PFS 5.5 months and median OS of 8.5 month (Von Hoff et al, 2013), although the normal cross-trial comparison caveats apply. No major new side effects were reported. The extension phase (n=40) is now ongoing, which is designed to check the effects of lower doses of CAN04 and expand the safety profile before progressing into Phase III trial. The recruitment is already complete and the data from this part are expected in H122. Cantargia is currently planning the next step, which could be a pivotal trial and is in discussions with regulatory authorities.

The latest interim results from the NSCLC arm were presented recently at the ESMO Congress in September 2021. Like with PDAC, interim results have been presented previously, so the positive update this time has already been discounted in the share price. The updated results showed that overall response rate (ORR) was 48%, while median PFS was 7.2 months. Putting this into context, historical control data show 22–28% ORRs for first-line intervention with gemcitabine/pemetrexed chemotherapy in NSCLC with median PFS of 5.1 months (Schiller et al, 2002; Scagliotti et al, 2008).

The new and unexpected finding was that a subset of patients who had non-squamous NSCLC showed a more pronounced benefit compared to those with squamous histology. The ORR in this subpopulation was 53%. Furthermore, an interesting finding was that the subgroup of eight patients previously treated with pembrolizumab monotherapy showed an ORR of 75%. Based on this insight Cantargia decided to focus on further development in non-squamous NSCLC, which is the largest subgroup of NSCLC and constitutes about 70–80% of all NSCLC cases. The most frequently used first-line platinum-based chemotherapy for this patient group is carboplatin/pemetrexed (so far CAN04 was being used in combination with gemcitabine/cisplatin in the NSCLC arm of the CANFOUR trial). As the CANFOUR trial is approaching its completion and seeing this benefit in a more specific subgroup of patients, Cantargia quickly initiated a new trial within the CANFOUR programme, which will enrol patients with non-squamous NSCLC for front-line treatment with CAN04 in combination with carboplatin/pemetrexed. In total, 40 new patients are planned to be recruited.

Throughout the course of this year Cantargia has substantially expanded its development programme of CAN04 (Exhibit 2):

During the first nine months of 2021 (9M21), Cantargia reported an increased operating loss of SEK265m (9M20: SEK118m), driven by the growing R&D costs. We had already anticipated growing R&D costs. Following the latest results, we have revised our operating loss estimates somewhat further up, to SEK348m from SEK276m previously, and keep the spending similar in 2022. Cantargia is well capitalised and the existing cash and short-term investments (SEK648m at end-Q321) are still sufficient until 2023. This means that many of the catalysts listed above are within cash reach.

Our updated valuation of Cantargia is virtually unchanged at SEK6.91bn or SEK68.9 per share, versus SEK6.86bn or SEK68.5 per share previously, as rolling our model forward was offset by a lower cash position. We make no changes to our other assumptions.

Potential use of CAN04 in NSCLC contributes c 38% of our valuation and, while we acknowledge sentiment has been knocked and the share price declined significantly after the Novartis Phase III trial data, because of the differences described above we do not feel this currently necessitates a fundamental change to our assumptions. The expanded R&D programmes will provide many catalysts in the near term: