A ‘Deep Dive’ On a ~$5.50 Biotech Concern
Today, we take a look at a ‘Tier 4’ developmental biotech concern that currently sells around $5.50 a share. The company has multiple ‘shots on goal’ within its mostly mid-stage pipeline. Are the shares a Buy, Sell or a Hold? We take a look in the paragraphs below.
Calithera Biosciences (CALA) is a San Francisco, California based clinical-stage biopharmaceutical company that was founded in 2010 and came public in late 2014. The stock has a current market capitalization of approximately $200 million.
Calithera is focused on discovering and developing first-in-class small molecule drugs that slow tumor growth by controlling key metabolic pathways in the tumor and immune cells. The company’s pipeline is built around their onco-metabolism platform. The onco -metabolism platform is a part of the vanguard in the field of tumor metabolism and tumor immunology.
Source: Company Presentation
The company’s lead product candidate CB-839 is a product of their platform. The main goal of a therapeutic that targets a tumor’s metabolism is to exploit the fact that cancer cells have certain specific nutrient dependencies in order to block cancer growth or activate cancer fighting cells. The company’s therapeutic areas of focus include renal cell carcinoma, triple-negative4 breast cancer, and melanoma. Changes in cellular metabolism are incredibly consistent across numerous tumor types, which provides the potential to develop broadly applicable agents that target metabolic pathways and have less toxicity than cytotoxic agents.
CB-839 is an orally bioavailable inhibitor of human glutaminase. Alterations in the metabolic pathway of tumors often causes a large rise in the uptake of glucose and glutamine. The removal of glutamine leads to a large reduction in cell growth and induces cell death in certain types of cancer cells. The idea behind CB-839 is that it could treat cancer by first starving the tumor cell and then by facilitating the activation of T-cells in the tumor’s microenvironment. Initial Phase I results were encouraging. A Phase 2 trial combining it and Cabozantinib called ‘Cantana’ for the treatment of Renal cell carcinoma has just kicked off. This combination received Fast Track status from the FDA in Mid-April.
A Phase 2 trial for the treatment of Chronic Liver Disease-Associated Pruritus should also get underway sometime in 2018. The rest of Calithera's diverse pipeline is at an earlier stage of development. One of these is the compound INCB001158. Back in January of 2017, Incyte (INCY) paid $45 million upfront and $8 million in an investment in Calithera’s equity for a strategic collaboration to develop this promising drug candidate. Calithera will receive 40% of U.S. profits, low to mid double-digit royalties ex-US, and up to $750 million in potential milestones around this program if successful.
Analyst Commentary & Balance Sheet:
Analyst views on Calithera are sparse but supportive. Last summer H.C. Wainwright reissued its Buy rating and lifted its price target on CALA to $19 from $14 previously. On February 16th of this year, Citigroup upgraded the name to a Buy with a $14 price target. The company ended the first quarter with just over $170 million in cash on the balance sheet (over 80% of its current market capitalization). Calithera is generating about $20 million of operating expenses a quarter including R&D. This is somewhat offset by some collaboration revenue from the Incyte deal described above.
This developmental concern has multiple ‘shots on goal’, a significant strategic partnership with Incyte and is well funded at the moment. That said, the company is years away from any potential commercialization. I think CALA is worthy of a ‘watch item’ investment at the current time within a well-diversified biotech portfolio. This equity also has options available which makes it a solid Buy-Write candidate as well. This is the way I am currently investing in this name.
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