Context Therapeutics — Period marked by readouts and pipeline progress

Recent months have been marked by notable pipeline development activity by Context, as it signed a collaboration deal with Menarini, reported preliminary data from two Phase II investigator-sponsored trials (endometrial cancer and granulosa cell tumor (GCT) of the ovary) and made progress in finalizing its CLDN6 clinical candidate (see Exhibit 1 for an overview of Context’s ongoing clinical trials).

Preliminary data from the remaining Phase II trial in second/third-line HR+/HER2- mBC (SMILE study; ONA-XR+fulvestrant) are expected in December 2022 and we see this as the next catalyst for the company. The results may also have a bearing on the recently initiated ELONA trial (given that elacestrant is an oral SERD challenging the standard-of-care fulvestrant, which is an injectable SERD) and should therefore be of particular interest to the market. Phase Ib data from the ELONA trial (please see our update note published on 2 August for more details) are expected in Q423 and could be another major infection point for Context.

Despite the hormonal origins of endometrial cancer, anti-hormone therapies have, to date, been unsuccessful in delivering meaningful benefits to patients with advanced disease (unlike in breast cancer). We note that the only hormonal therapy currently approved for recurrent endometrial tumors is the progestin, megestrol acetate, which has shown a 20–30% response rate in metastatic patients. Antiestrogens such as tamoxifen and aromatase inhibitors have only shown modest improvement in smaller studies, although this could be partially attributable to lack of patient selectivity.

More recently, the FDA has given the green light to two checkpoint inhibitors – Jemperli (April 2021) and Keytruda (March 2022) as monotherapies and Keytruda+Lenvima (accelerated approval in September 2019, full approval in July 2021) as combination treatment – although all of have certain limitations. While the checkpoint inhibitors only work for a subset of patients (those with the microsatellite instability-high (MSI-H) or mismatch repair deficient (dMMR) mutations; collectively 16–31% of all advanced endometrial cancer cases), the combination treatment is associated with serious side effects, most notably hypertension, resulting in 30% of patients discontinuing treatment.

Context is developing ONA-XR as a combination therapy with antiestrogens for this indication based on the same principle as the one Context is applying in breast cancer, to potentially improve treatment outcomes by achieving complete hormone blockage.

In our view, the key highlight of the Q322 release was the encouraging preliminary data presented by the company from its ongoing Phase II trial in recurrent endometrial cancer. As a reminder, the study (ONWARD 221) is an open-label, single-arm, investigator-sponsored trial evaluating ONA-XR (50mg BID) in combination with antiestrogen anastrozole in women with progesterone receptor positive (PR+) metastatic endometrial cancer after progression on at least one prior line of chemotherapy. The first patient was dosed in May 2021 and the study aims to enroll 25 patients across three sites in the United States. The primary endpoints are four-month progression-free survival (PFS) and objective response rate (ORR).

As of 30 September 2022, 12 patients have been enrolled in the trial and the reported PFS data relates to nine evaluable patients. The reported four-month PFS of 77.7% (12-month PFS of 33%; n=3) is encouraging and superior to results from previous standalone trials (see Exhibit 2), although larger data sets are needed to confirm the initial findings. We also note that potential variations in study designs, dosages, patient population and cohort size mean that the data may not be strictly comparable on a head-to-head basis. Nevertheless, we see this as an early validation of ONA-XR’s potential and combination approach which, if replicated in the full data set following complete enrolment and in subsequent larger, randomized studies, could translate to significant market potential. We expect further clarity on this when Context presents additional data in mid-2023.

In addition to initial data from the Phase II endometrial cancer, Context also reported updated data from the ongoing basket study evaluating ONA-XR both as monotherapy and in combination with anastrozole in women with PR+ advanced GCT of the ovary (cohort 1 and cohort 4, respectively). The 84-week study was designed as a Simon two-stage study with both cohorts recruiting 14 patients in stage 1. The criterion to move to stage 2 was overall response (complete or partial) from at least one of the 14 patients. Data from cohort 1 (a monotherapy arm, which commenced enrollment in May 2019) was presented by the company at the American Society of Clinical Oncology in June 2022, reporting 12-month PFS of 20.1% and a clinical benefit rate (stable disease) of 35.7%. However, the ORR cut-off required to progress to stage 2 was not met and therefore we do not expect the company to pursue this indication as a monotherapy.

The combination arm of the study (cohort 4) initiated recruitment in 2021 and has completed enrollment of the 14th patient according to the latest information provided by the company. As with cohort 1, the criterion to advance to stage 2 will be objective response from at least one of the 14 patients and it is unclear as of now if the combination treatment has been able to meet this requirement. Seven patients remain on the trial. We expect the combination treatment to deliver incremental efficacy versus monotherapy and await further data from the company on this (expected in mid-2023). We highlight that more than 95% of GCT tumors are PR+, making them a potentially attractive therapeutic target for anti-progestin therapies. Moreover, these tumors are characterized by very few mutations, limiting the applicability of targeted treatments. With no currently approved treatments in the recurrent setting for this indication, the market opportunity for any new treatments remains high, in our view. We note that the FDA granted the fast-track designation for ONA-XR in PR+ ovarian cancer in August 2020, highlighting the significant unmet need in the space.

Context reported a net loss of $3.9m in Q322, significantly higher than the corresponding figure of $1.4m in Q321, driven by higher R&D and G&A expenses attributable to ongoing clinical trials and preclinical development efforts. Q322 R&D expenses stood at $2.1m versus $0.7m in Q321 ($1.5m in Q222) and we expect this figure to increase further in Q422 with the initiation of the Phase Ib ELONA trial (sponsored by Context). We note that the company has recently announced cost-cutting measures, deprioritizing discretionary R&D on preclinical activities and focusing entirely on the current developmental pipeline. G&A expenses during the quarter were $2.0m (in line with the previous quarter but higher than the $0.8m recorded in Q321) due to higher headcount and insurance and professional fees. We have made slight adjustments to our FY22–24 forecasts based on the Q322 results.

Period-end cash was $39.4m which, based on our cash burn projections, should be sufficient to fund operations into Q124, past key milestones such as interim data from the ELONA trial (Q423) and IND submission for the CLDN6 program (Q124). Assuming self-commercialization, we estimate the need to raise a further $140m between FY24 and FY26 (lower than our previous estimate of $160m due to the announced cost-savings initiatives) before reaching profitability in FY27, contingent on its programs receiving market approval. We show the raises as illustrative debt, according to Edison methodology. We also believe that a positive result from the ongoing combination studies could lead to potential licensing partnerships in the future for ONA-XR.

We make minor adjustments to our estimates to factor in the Q322 performance and a slightly lower period-end net cash figure ($39.4m versus $42.9 in Q222). Overall, our valuation reduces slightly to $146.5m ($9.18/share) from $150m ($9.39/share) previously.