Checkpoint Therapeutics Inc
Checkpoint Therapeutics Inc (CKPT) is on the cusp of becoming a significant player in the rapidly expanding immunotherapy market. Its lead candidate, cosibelimab, is a potential best-in-class anti-PD-L1 antibody, with very good clinical data through phase 3 and a PDUFA date of January 3, 2024. However, the balance sheet is a problem, in particular warrants owned by Armistice Capital.
I met with the team on December 6, 2023, and the CFO clarified the warrants as follows: $68 million assuming all warrants are exercised. There approximately 29 million warrants outstanding with an average exercise price of $2.32. Some are at $3.35, some around $2.80, and some at $1.51. The flip side of the $68 million in cash (sufficient to fund drug launch to break even) is dilution of approximately 50%.
Cosibelimab, a fully-human monoclonal antibody that targets PD-L1, is being developed for the treatment of solid tumor oncology indications, including metastatic and locally advanced cutaneous squamous cell carcinoma (CSCC). Phase 3 trials are complete and approval for marketing and sale is expected in January 2024, around the same time as the JP Morgan Healthcare Conference in San Francisco.
CKPT commenced a Phase 1 clinical study for cosibelimab in October 2017, evaluating its safety and tolerability in patients with selected recurrent or metastatic cancers. Following the completion of dose escalation, dose expansion cohorts were initiated, including cohorts in locally advanced and metastatic CSCC intended to support applications for marketing approval.
The company announced top-line results from a cohort of this study with cosibelimab administered as a fixed dose of 800 mg every two weeks in patients with metastatic CSCC, which met its primary endpoint with a confirmed objective response rate (ORR) of 47.4% based on independent central review. Interim results from another cohort with cosibelimab in patients with locally advanced CSCC demonstrated a confirmed ORR of 54.8%.
Based on these results, CKPT submitted a Biologics License Application (BLA) to the U.S. Food and Drug Administration (FDA) for cosibelimab in January 2023. The application is filed and under review, with a Prescription Drug User Fee Act (PDUFA) goal date of January 3, 2024. The company also plans to submit a marketing authorization application (MAA) in Europe in the second half of 2023, followed by additional potential submissions in markets worldwide.
Investors should note: CKPT announced longer-term results for cosibelimab from its pivotal studies in locally advanced CSCC. The results demonstrated a COMPLETE RESPOSE RATE of 55% in the locally advanced CSCC cohort based on independent central review (January 2023). These results indicate a deepening of response over time, with the median duration of response not yet reached, suggesting that responses continue to remain durable.
Here are some other key factors:
1. Addressing a Large and Growing Market: The global market for PD-L1 inhibitors is expected to reach $32 billion by 2028, driven by the rising prevalence of cancer and increasing adoption of immunotherapy.
2. Competitive Advantages of Cosibelimab: Clinical data suggests cosibelimab may offer superior efficacy and safety compared to existing PD-L1 inhibitors for CSSC (ie. Keytruda & Libtayo), potentially leading to better patient outcomes. Its unique mechanism of action targeting both PD-L1 and TIM-3 pathways could broaden its therapeutic scope and address resistance issues. Management believes its first patients will be prescribed cosibelimab as an alternative to chemotherapy as those patients make up the majority in terms of treatment of CSCC.
3. Robust Pipeline and Strategic Partnerships: Checkpoint’s pipeline includes several other promising assets in various stages of development, diversifying its portfolio and minimizing risk.
4. Cash and inventory: As of September 30, 2023, CKPT reported cash and cash equivalents of $1.7 million, or about 3-4 months of runway. This is the weakest part of CKPT’s story. It is vital for the company to obtain approval in January as this event will open up many options for liquidity. In 2023, the company purchased approximately $10 million of inventory of cosibelimab, which is secured in long-term frozen storage.
CKPT has issued several warrants with different exercise prices and expiration dates throughout 2023. Here are the details of the warrants issued:
- February 2023 Registered Direct Offering: Series A and B warrants were issued to purchase up to 1,428,572 shares of common stock each, with an exercise price of $5.00 per share. Series A warrants will expire five years after issuance, and Series B warrants will expire eighteen months after issuance.
- April 2023 Registered Direct Offering: Series A and B warrants were issued to purchase up to 1,700,000 shares of common stock each, with an exercise price of $3.35 per share. Series A warrants will expire five years after issuance, and Series B warrants will expire eighteen months after issuance .
- May 2023 Registered Direct Offering: Series A and B warrants were issued to purchase up to 3,256,269 shares of common stock each, with an exercise price of $2.821 per share. Series A warrants will expire five years after issuance, and Series B warrants will expire eighteen months after issuance.
- July 2023 Registered Direct Offering: Series A and B warrants were issued to purchase up to 3,236,248 shares of common stock each, with an exercise price of $2.84 per share. Series A warrants will expire five years after issuance, and Series B warrants will expire eighteen months after issuance.
Additionally, in October 2023, CKPT entered into an inducement offer letter agreement with a holder of certain existing warrants to exercise for cash an aggregate of 6,325,354 shares of common stock at a reduced exercise price of $1.76 per share. These warrants were originally issued with exercise prices of $4.075 and $5.00 per share. As part of this inducement, new Series A and B warrants were issued to purchase up to 6,325,354 shares of common stock each, with an exercise price of $1.51 per share. The Series A warrants will expire five years following the issuance date, and the Series B warrants will expire twenty-four months following the issuance date.
Investors should note: If the stock rises above $5, it is likely that warrant exercises will be sufficient fund the $50 million the company estimates it will need to market cosibelimab. There are other options for financing including royalties and partnerships.
Patents: The company’s U.S. patent portfolio, expiring no earlier than May 2038, provides the potential for cosibelimab to be further developed into a market leading drug, not only in CSCC, but also in additional indications, both as a monotherapy and as the PD-L1 backbone for new combination regimens.
- CAIX Antibodies: The portfolio includes three granted U.S. patents (Nos. 8,466,263, 10,450,383, and 11,174,323) related to CAIX antibodies and methods of treating cancer, with expiration dates ranging from 2027 to 2029. European and Canadian counterpart patents are also in force.
- GITR Antibodies: The GITR segment includes one granted U.S. patent (No. 10,463,732) expiring in 2035, and other national stage applications pending in various jurisdictions, with potential expiration dates no earlier than 2037.
- PD-L1 Antibodies: The PD-L1 segment includes two granted U.S. patents (Nos. 9,828,434 and 10,604,581) expiring in 2033, with additional international counterpart patents and applications pending.
- EGFR Inhibitors: The patent estate includes several granted U.S. and international patents related to small molecule inhibitors of EGFR, including olafertinib, with expiration dates in 2034 and potential patent term restorations.
- BET Inhibitors: The portfolio includes patents and applications related to small molecule inhibitors of BET, specifically targeting BRD4, with expected expiration dates in 2036.
- Licensing Agreements: CKPT has entered into licensing agreements with Dana-Farber for a portfolio of fully human immuno-oncology targeted antibodies, including antibodies targeting PD-L1, GITR, and CAIX. The agreement includes milestone payments and royalties based on net sales.
- On December 5th, the USPTO issued a new patent (U.S. Patent No. 11,834,505) covering a method of treating various cancers, including cutaneous squamous cell carcinoma (“cSCC”), through the administration of cosibelimab. The USPTO previously issued a composition of matter patent (U.S. Patent No. 10,590,199), specifically covering cosibelimab, or a fragment thereof. Together, these patents protect Checkpoint’s differentiated and potential best-in-class anti-PD-L1 antibody, cosibelimab, in the U.S. through at least May 2038, not including any potential patent term extension under the Hatch-Waxman Act.
CKPT has several royalty arrangements in place:
- With TG Therapeutics, Inc. (TGTX), CKPT is eligible to receive up to an aggregate of $60.0 million upon TGTX’s successful achievement of certain sales milestones, in addition to royalty payments based on a tiered low double-digit percentage of net sales.
- Under a collaboration agreement with Adimab, LLC, CKPT is eligible to receive payments up to an aggregate of approximately $4.8 million upon various filings for regulatory approvals to commercialize the product, as well as royalty payments based on a tiered low single-digit percentage of net sales.
- CKPT has a license agreement with Dana-Farber Cancer Institute, Inc., under which they are eligible to receive up to an aggregate of $60.0 million upon successful achievement of certain sales milestones, in addition to royalty payments based on a tiered low to mid-single digit percentage of net sales.
- A license agreement with NeuPharma, Inc. allows CKPT to receive payments of up to an aggregate of $40.0 million upon successful achievement of certain sales milestones, in addition to royalty payments based on a tiered mid to high-single digit percentage of net sales.
- CKPT also has a license agreement with Jubilant Biosys Limited, which makes them eligible to receive payments up to an aggregate of approximately $89.3 million upon successful achievement of certain sales milestones, in addition to royalty payments based on a tiered low to mid-single digit percentage of net sales
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