KTRA: Two Phase III Ready Assets

By John Vandermosten, CFA

NASDAQ:KTRA

READ THE FULL KTRA RESEARCH REPORT

INITIATING COVERAGE

Key reasons to own Kintara Therapeutics (NASDAQ:KTRA) shares:

‣ Two Phase III ready assets to address an unmet need in GBM and CMBC

‣ VAL-083 is a well-understood chemotherapy agent with long history of use in other cancers

◦ Granted orphan status for both GBM and ovarian cancer

◦ Differentiated mechanisms that cross blood brain barrier and block repair enzyme

◦ Favorable drug safety profile

‣ Acceptance of VAL-083 into the highly regarded GCAR AGILE GBM study

◦ Provides registrational pathway with top tier partners

‣ REM-001 addresses unmet need in CMBC

◦ Substantial work completed to characterize safety and efficacy (~1,100 patients in safety database)

◦ Light activated drug reduces systemic risk

◦ Small inexpensive trial may be sufficient for approval

‣ Additional indications for VAL-083 and REM-001 in clinical development

We are initiating coverage of Kintara with a current valuation of $4.00 per share. This present value is based on our estimates for a successful Phase III trial for two compounds. The first, VAL-083, is expected to yield topline results in 2023, followed by a new drug application (NDA) and a 2025 launch of the product in selected geographies. The second is REM-001, a photodynamic therapy (PDT) that consists of a drug, a laser light source and a light delivery device which is expected to start a confirmatory trial in 2021 and later convert into a Phase III study generating data by late 2023 followed shortly after by NDA submission and commercialization in 2024.

VAL-083 is being investigated for glioblastoma multiforme (GBM), a deadly type of brain cancer with poor historical survival. Two Phase II trials are underway and we expect a pivotal Phase II/III study to begin before year end that will support the NDA. VAL-083 is a well understood molecule that has been investigated since the late 1970s (1) in clinical trials and is approved in China for two cancer indications. We believe VAL-083’s ability to cross the blood brain barrier and produce irreparable double strand DNA breaks in cancer cells make it a particularly attractive tool against GBM. Kintara has received investigational new drug (IND) clearance for a Phase I/II study in ovarian cancer; however, the primary focus for the company remains on late stage clinical assets. The FDA has granted both indications an orphan drug designation and the European Medicines Agency (EMA) has granted orphan status for gliomas, including GBM.

VAL-083 has a differentiated profile which allows the chemotherapeutic to cross the blood brain barrier and overcome resistance common to standard-of-care alkylating agents. VAL-083 can attack cancer cells by forming interstrand crosslinks at the N7 position of guanine on the DNA of cancer cells. The crosslinks form rapidly and are able to block repair by MGMT (2), leading to lethal double-strand breaks, cell-cycle arrest and apoptosis. Research has also shown that the drug is more readily absorbed by cancer cells as compared to normal cells. VAL-083 is effective against both MGMT-methylated cells and MGMT-unmethylated cells, which allows the agent to treat cancers resistant to temozolomide (TMZ) and nitrosoureas.

GBM is a rare disease, estimated to occur in three of every 100,000 persons. There are almost 12,000 new cases in the United States and 12,000 in the top five EU nations each year. GBM is a particularly aggressive form of cancer that has a median survival of about three months without treatment and 12 to 15 months (3) with treatment. When extending to three and five years beyond diagnosis, the percentage of survivors drops to single digits. The disease mostly affects older adults with a median age of 64 (3) with a higher incidence in men and in those of European descent.

Current treatment for GBM is surgery, followed by adjuvant radiation and chemotherapy. Despite the multimodal treatment, the side effects are severe and the survival advantage is measured in months. Two major obstacles to treatment are the ability of therapeutics to cross the blood brain barrier and repair enzyme mediated chemotherapy resistance. Due to these obstacles, the cancer is difficult to treat and almost always recurs; new therapies are desperately needed.

VAL-083 may answer the call to address this unmet need and early clinical trial data suggest it may extend overall survival (OS) compared to standard of care, especially in patients with unmethylated MGMT promoters. The latest data released by Kintara at the American Association for Cancer Research (AACR) 2020 meeting demonstrated an improvement in standard of care and we expect further supportive data from preliminary topline results in 4Q:20. We are optimistic about the upcoming adaptive trial with the Global Coalition for Adaptive Research (GCAR) that is paving a registrational pathway forward for VAL-083 in GBM. The GBM AGILE (Glioblastoma Adaptive Global Innovative Learning Environment) trial will reduce costs and accelerate results for Kintara’s NDA.

REM-001 has been investigated in several Phase II and Phase III trials, providing sufficient efficacy and safety data to support its use in cutaneous metastatic breast cancer (CMBC). The product works through an infusion of tin ethyl etiopurpurin (SnET2) suspended in a lipid formulation. Clinical studies of SnET2 indicate it selectively destroys tumor tissue, a likely result of its affinity for the neovasculature present in tumors. The higher metabolism of cancer cells may also accelerate the drug’s uptake compared to other cells but the drug remains inactive until exposed to specific wavelengths of light. This allows for precise targeting of the drug’s effect and reduces or minimizes a systemic side effect profile on the patient.

CMBC is estimated to affect up to 40,000 women in the United States and a similar number in Western Europe. Globally, there are estimated to be almost 500,000 breast cancer cases that will present with skin metastases. With no other effective treatments, CMBC is an unmet need that may be addressed by REM-001.

Following the consummation of the merger to September 1, 2020, Kintara raised a gross $25 million in cash from multiple closings of a private placement. The company holds Class A, B and C preferred shares which are accounted for in our model. Funds raised to date will enable the completion of two Phase II trials that are underway and prepare VAL-083 to participate in the GBM AGILE study and support the lead in and Phase III study for REM-001. We estimate that AGILE will require $25 million and REM-001 up to $37 million to fund to completion.

Our model forecasts pivotal GBM AGILE data to be available by late 2023 followed by an NDA submission to the FDA. Kintara will likely work with a partner to commercialize VAL-083 and we anticipate the US and Europe will be the first markets pursued. If successful, VAL-083 will provide a better alternative to GBM patients in a variety of settings. Kintara will also advance REM-001 along a similar timeline with a Phase III trial beginning after a short lead-in study, with Phase III results expected in late 2023 followed shortly after by an NDA filing in and with commercialization in 2024.

See our full initiation here for additional detail.

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1. Espana, P., et al. Phase II Study of Dianhydrogalactitol in Malignant Glioma. Cancer Treat Rep. 1978 Aug;62(8):1199-200.

2. O6-methylguanine-DNA methyltransferase (MGMT)

3. Tamimi, A.F., Juweid, M.; Epidemiology and Outcome of Glioblastoma. Brisbane (AU): Codon Publications; 2017 Sep 27.

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