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Research: Healthcare
Chimeric has announced that it has entered into an exclusive option agreement to license the clinically validated, off the shelf, robust, enhanced natural killer (CORE-NK) cell platform from Case Western Reserve University for the treatment of cancer. The CORE-NK platform was designed to overcome the hurdles associated with NK cell development and enables the production of large numbers of highly active universal donor NK cells that are active in the body. The company expects to rapidly move to complete full licensing of the platform.
Written by
Maxim Jacobs
Chimeric Therapeutics |
Acquiring an exciting new NK cell technology |
Development update |
Pharma & biotech |
6 December 2021 |
Share price performance
Business description
Next events
Analysts
Chimeric Therapeutics is a research client of Edison Investment Research Limited |
Chimeric has announced that it has entered into an exclusive option agreement to license the clinically validated, off the shelf, robust, enhanced natural killer (CORE-NK) cell platform from Case Western Reserve University for the treatment of cancer. The CORE-NK platform was designed to overcome the hurdles associated with NK cell development and enables the production of large numbers of highly active universal donor NK cells that are active in the body. The company expects to rapidly move to complete full licensing of the platform.
Year end |
Revenue (A$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
06/20 |
0.0 |
(0.1) |
(62.01) |
0.0 |
N/A |
N/A |
06/21 |
0.0 |
(14.9) |
(0.08) |
0.0 |
N/A |
N/A |
06/22e |
0.0 |
(14.0) |
(0.04) |
0.0 |
N/A |
N/A |
06/23e |
0.0 |
(14.5) |
(0.04) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Improving NK cells
NK cells are naturally found within the body and are able to recognise and kill cancer cells, but efficacy when used in a therapeutic setting is often limited due to challenges in manufacturing enough of them to halt the growth of many cancers. CORE-NK cells are made by activating and expanding NK cells to make them more active and robust in large numbers.
Enabling an expansion of the pipeline
Besides using CORE-NK cells to target cancer directly, this licensure would allow for the creation of CAR-NK programs to augment the current CLTX CAR T and CDH17 CAR T programmes that are focused on solid tumours. Four new pipeline programmes are expected to be started in 2023 following the anticipated acquisition of the CORE-NK platform.
Positive low dose CHM 1101 data from Phase I
Data from the low dose cohort of four patients from the Phase I trial of CHM 1101 (CLTX CAR T) was presented in November at the Society for Neuro-Oncology (SNO) annual meeting. Three out of four patients achieved stable disease that was durable for five to eight weeks. In one patient, there was no evidence of progression in the part of the brain in which CHM 1101 was infused intratumourally and progression was only seen in an area of the brain where it was not infused intertumourally.
Valuation: A$322m or $0.97 per share
We have adjusted our valuation from A$327m or A$0.99 per share to A$322m or A$0.97 per basic share, mainly due to lower net cash. Because the CORE-NK platform is not fully licensed and its associated products are not yet in the clinic, we are not including them in our valuation yet, in accordance with Edison methodology. Once included, they may have a meaningful impact upon the valuation due to the size of the markets targeted by the company.
The CORE-NK platform
Chimeric has announced that it has entered into an exclusive option agreement to license the CORE-NK platform from Case Western Reserve University. NK cells are found in the body naturally and are able to recognise and kill cancer cells without affecting healthy cells. They are also able to produce cytokines that use the immune system to mount an additional response to kill tumours. However, efficacy when used in a therapeutic setting is often limited due to challenges in manufacturing enough of them to halt the growth of many cancers. Through the platform, CORE-NK cells are made by activating and expanding NK cells to make them more active and robust in large numbers.1 The company expects to rapidly move to complete full licensing of the platform. Financial terms are likely to include development milestones, industry standard royalties (likely single digit in our view) and an upfront payment.
Ojo et al., Membrane bound IL-21 based NK cell feeder cells drive robust expansion and metabolic activation of NK cells. Scientific Reports 2019 Oct 17;9(1):14916.
The anticipated licensure would enable a significant expansion of the product pipeline past CHM 1101 and CHM 2101, the CLTX and CDH17 CAR T therapies, respectively, currently in development. The company plans to develop CAR NK versions of both those programmes, develop therapies using the current and next generation CORE-NK platform and an additional CAR NK with an undisclosed target. CAR NK products would be made by inserting CARs into the CORE-NK platform cells. Adding the CARs improves the delivery of the NK cells to specific antigen-expressing tumours.
Exhibit 1: Planned Chimeric pipeline post-CORE-NK licensure
Programme |
Construct |
Type |
Indication focus |
Status |
CHM 1101 |
CLTX CAR T |
Autologous |
Glioblastoma multiforme (GBM), melanoma, colorectal, prostate |
Phase I ongoing in GBM, second trial in another indication planned for 2022 |
CHM 2101 |
CDH17 CAR T |
Autologous |
Neuroendocrine, colorectal, pancreatic, gastric |
Phase I expected 2022 |
CHM 0201 |
CORE -NK Platform |
Allogeneic |
Both hematologic and solid tumours |
Phase I complete (9 patients completed all three dose levels with data expected in 2022), further technological enhancements planned for development as combination therapy |
CHM 0301 |
Next Generation CORE-NK platform |
Allogeneic |
Hematologic tumours |
Phase I planned 2023 |
CHM 1301 |
CLTX CAR -NK |
Allogeneic |
Glioblastoma multiforme (GBM), melanoma, colorectal, prostate |
Phase I planned 2023 |
CHM 2301 |
CDH17 CAR-NK |
Allogeneic |
Neuroendocrine, colorectal, pancreatic, gastric |
Phase I planned 2023 |
CHM 3301 |
Undisclosed CAR-NK |
Allogeneic |
Undisclosed |
Phase I planned 2023 |
Source: Chimeric Therapeutics
As NK cells are not thought to cause graft-versus-host-disease (GVHD), all these CORE-NK based therapies have the potential to be allogeneic, where cells from a single donor could be used to treat multiple patients. This is in contrast to autologous therapies where treatments are based on a patient’s own cells. Allogeneic therapies hold the promise of starting with healthier material, lowering manufacturing costs and being rapidly available to patients (the bespoke nature of autologous treatments can delay treatment for weeks).
Besides these announced programmes, Chimeric will be seeking additional collaboration and licensing opportunities for the platform.
CHM 1101 data from the low-dose cohort
At the SNO conference in November, data from the CHM 1101 Phase I was presented. The data focused the four patients who were enrolled at the lowest dose level of 44m CLTX CAR T cells (which were injected intratumourally in a single injection). Stable disease was achieved in three out of the four patients with durability of five to eight weeks. Importantly, in one patient, there was no observed tumour recurrence in the left frontal lobe where the CLTX CAR T cells were administered. Tumour progression in that patient occurred in the left temporal lobe, which did not receive the infusion. Also, with regards to safety, therapy was generally well tolerated and there were no cytokine release syndrome (CRS) events due to therapy.
Dose escalation is planned across four dose levels up to 440m cells through dual intratumoural and intraventricular routes of administration (intraventricular administration only starts at the 88m cell dose level).
Valuation
We have adjusted our valuation from A$327m or A$0.99 per share to A$322m or A$0.97 per basic share, mainly due to lower net cash. Because the CORE-NK platform is not fully licensed and its associated products are not yet in the clinic, we are not including them in our valuation yet, in accordance with Edison methodology. Once included, they may have a meaningful impact upon the valuation due to the size of the markets targeted by the company.
Exhibit 2: Chimeric valuation table
Product |
Main indication |
Status |
Probability of successful commercialisation |
Approval year |
Peak sales (A$m) |
Economics |
rNPV |
CLTX-CAR T |
GBM |
Phase I |
10% |
2027 |
3,210 |
100% less single-digit royalty to COH |
305.0 |
Total |
|
|
|
|
|
|
305.0 |
Net cash (as of 30 September 2021) |
17.4 |
||||||
Total firm value (A$) |
322.42 |
||||||
Total basic shares (m) |
333.4 |
||||||
Value per basic share (A$) |
0.97 |
||||||
Options (m) |
32.1 |
||||||
Total number of shares (m) |
365.6 |
||||||
Diluted value per share (A$) |
0.88 |
Source: Edison Investment Research. Note: COH is the City of Hope cancer center
Financials
In the quarterly cash flow report for the first quarter of FY22 (the period ending 30 September 2021), Chimeric reported A$17.4m in cash at Q122. In FY21 the company had an operating loss of A$15.1m. We have not made any meaningful changes to our financial model following these results and have introduced FY23 estimates, which feature A$14.5m in operating expenses. We may increase our R&D expense estimates once we have more clarity on the clinical programme post the closure of the licensing of the CORE-NK platform. We continue to project a financing need of A$80m through 2026, with A$20m expected to be raised in FY22 and modelled as illustrative debt.
Exhibit 3: Financial summary
A$'000s |
2020 |
2021 |
2022e |
2023e |
||
Year end 30 June |
AIFRS |
AIFRS |
AIFRS |
AIFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
0 |
0 |
0 |
0 |
Cost of Sales |
0 |
0 |
0 |
0 |
||
Gross Profit |
0 |
0 |
0 |
0 |
||
Sales, General and Administrative Expenses |
(64) |
(11,068) |
(4,007) |
(4,167) |
||
Research and Development Expense |
0 |
(3,778) |
(9,975) |
(10,374) |
||
EBITDA |
|
|
(64) |
(14,847) |
(13,982) |
(14,541) |
Operating Profit (before amort. and except.) |
|
|
(64) |
(14,847) |
(13,982) |
(14,541) |
Intangible Amortisation |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
(264) |
0 |
0 |
||
Operating Profit |
(64) |
(15,110) |
(13,982) |
(14,541) |
||
Net Interest |
0 |
(3) |
(3) |
(3) |
||
Other |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(64) |
(14,850) |
(13,985) |
(14,545) |
Profit Before Tax (FRS 3) |
|
|
(64) |
(15,114) |
(13,985) |
(14,545) |
Tax |
0 |
0 |
0 |
0 |
||
Deferred tax |
(0) |
(0) |
(0) |
(0) |
||
Profit After Tax (norm) |
(64) |
(14,850) |
(13,985) |
(14,545) |
||
Profit After Tax (FRS 3) |
(64) |
(15,114) |
(13,985) |
(14,545) |
||
Average Number of Shares Outstanding (m) |
0.0 |
181.9 |
333.4 |
336.7 |
||
EPS - normalised (A$) |
|
|
(62.01) |
(0.08) |
(0.04) |
(0.04) |
EPS - Reported (A$) |
|
|
(63.02) |
(0.08) |
(0.04) |
(0.04) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
0 |
13,840 |
17,072 |
20,338 |
Intangible Assets |
0 |
13,826 |
16,244 |
18,661 |
||
Tangible Assets |
0 |
14 |
829 |
1,677 |
||
Other |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
(0) |
22,665 |
28,662 |
29,154 |
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
0 |
24 |
0 |
0 |
||
Cash |
(0) |
22,410 |
28,063 |
28,187 |
||
Other |
0 |
231 |
599 |
967 |
||
Current Liabilities |
|
|
(64) |
(7,355) |
(7,355) |
(7,355) |
Creditors |
(30) |
(7,355) |
(7,355) |
(7,355) |
||
Short term borrowings |
(34) |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
0 |
(4,019) |
(24,019) |
(39,019) |
Long term borrowings |
0 |
0 |
(20,000) |
(35,000) |
||
Other long-term liabilities |
0 |
(4,019) |
(4,019) |
(4,019) |
||
Net Assets |
|
|
(64) |
25,131 |
14,360 |
3,118 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(34) |
(8,835) |
(10,928) |
(11,424) |
Net Interest |
0 |
0 |
0 |
0 |
||
Tax |
0 |
0 |
0 |
0 |
||
Capex |
0 |
(5,307) |
(3,419) |
(3,452) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Financing |
0 |
36,585 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
(34) |
22,443 |
(14,347) |
(14,876) |
||
Opening net debt/(cash) |
|
|
0 |
34 |
(22,410) |
(8,063) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Exchange rate movements |
0 |
(9) |
0 |
0 |
||
Other |
0 |
10 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
34 |
(22,410) |
(8,063) |
6,813 |
Source: company reports, Edison Investment Research
|
|
Research: Healthcare
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