LTRN: $69 Million Raise & New Programs Spark Price Target Increase

By John Vandermosten, CFA

NASDAQ:LTRN

READ THE FULL LTRN RESEARCH REPORT

On January 20th, 2021, Lantern Pharma Inc. (NASDAQ:LTRN) announced that it had closed a public offering with gross proceeds of $69 million, giving the firm ample resources to achieve important clinical milestones. In addition, Lantern has also added an indication in atypical teratoid rhabdoid tumors (ATRT), details for which are available in the latest corporate presentation. The indication was selected based on analysis with Lantern’s proprietary RADR (1) AI platform. Other important recent news includes the pursuit of central nervous system (CNS) tumors with LP-184 in combination with antibody-drug conjugates (ADCs) that will allow cancer-specific targeting with nanomolar-potency in treatment-resistant cancers. We increase our target price to $30 on the raise of additional capital and advancement of new programs.

$69 Million Public Offering

On January 20, 2021, Lantern closed its public offering that yielded $69 million in gross proceeds and saw the full exercise of underwriter over-allotment option. The offer sold 4,928,571 shares of common stock at $14.00 per share, which included 642,856 in underwriter purchases. Net proceeds were approximately $64 million. Management has guided toward a cash position of over $80 million by the end of first quarter 2021.

With this successful capital raise, Lantern attracted investment from Black River, Corriente, Empery Asset Management, Altium Capital and 5T Capital among others. The raise is expected to allow completion of trials in brain cancers, more specifically ATRT. The raise is also expected to allow Lantern to launch Phase I trials for its ADC program. The additional cash is sufficient for Lantern to fund operations over the next several years and achieve identified milestones, independent of near-term fluctuations in capital markets.

Atypical Teratoid Rhabdoid Tumors (ATRT)

Atypical teratoid rhabdoid tumors (ATRT) belong to a family of rhabdoid tumors (RT) that can arise in the liver, brain or central nervous system (CNS). 66% of RT arise in the brain and CNS and are known as ATRT. ATRT are a rare and rapidly proliferating cancer (Grade IV) of the brain and spinal cord. ATRT is considered ultra-rare. There are an estimated 58 pediatrics patients diagnosed per year, and an estimated 596 people below the age of majority with the disease in the US (2). Another 10 to 15 cases appear in adults each year. Estimates of the percentage of ATRT originating in the brain vary considerably, with estimates between 15% (3) and 50% (4). The cancer is very rare, and occurs in less than 10% of pediatric brain tumors. When it occurs, it is most frequently in children aged 3 and under. Symptoms of ATRT include morning headaches or headaches that are less painful after vomiting, change in activity levels and lethargy, loss of balance or trouble walking, asymmetric eye movements, and increased head size. Treatment is multi-modal including surgery, chemotherapy and radiation. Due to the location in the brain, the tumor is often unresectable. Survival rates are poor with the 5-year rate estimated at 32.2% (5). Most ATRT are caused by mutations in the SMARCB1 gene, which is responsible for tumor growth suppression. When mutated, it is no longer able to suppress tumor formation.

Lantern began focus on brain and CNS cancers after confirming that its candidate LP-184 readily penetrated the blood-brain barrier. Because LP-184 is able to cross, it can act on cancers in the brain and CNS. Lantern enriched RADR’s dataset with 100 million genomic, transcriptomic and drug sensitivity data points specific to brain and CNS cancers leading to the identification of ATRT as a potential target for LP-184. Lantern has been collaborating with researchers from Johns Hopkins for LP-184 in GBM. ATRT is also a research interest for the Johns Hopkins group.

Several other companies have programs that include ATRT. Epizyme (EPZM) has a Phase II trial enrolling multiple rhabdoid tumors. Vyriad has an open label Phase I for brain tumors. Novartis (NVS) has a Phase I in 55 brain tumors. And Cellectar Biosciences (CLRB) has a Phase I open label in malignant brain tumors. Istari Oncology has sponsored a study in recurrent malignant glioma in pediatric populations. Takeda and Millennium Pharmaceuticals also are collaborating on a Rhabdoid Tumor trial.

In vitro evaluation has already shown nanomolar potency of LP-184 across multiple ATRT cell lines as measured by IC50, or the concentration required to decrease the intended biochemical function by half.

Exhibit I – LP-184 IC50 (nM) vs ATRT Cell Lines (6)

Since they are uncommon, pursuit of diseases such as ATRT affords special FDA approval pathways including Orphan Drug Designation and Rare Pediatric Disease Priority Review Voucher Programs (7). Additionally, the discovery of the relevance of SMARCB1 to LP-184 may hold significance in other, peripheral cancers. In addition to the brain and CNS, ATRT and RT can occur in the kidney. SMARCB1 mutations may occur in certain types of lung and ovarian cancer as well. Lantern tested various cell types, with varying SMARCB1 expression for sensitivity to LP-184 and found statistical significance between SMARCB1 expression and LP-184 sensitivity.

LP-184 Experimental Insights with Various Cell Types and Biomarkers

Exhibit II – LP-184 Sensitivity vs. SMARCB1 Expression (8)

The SMARCB1 gene can guide Lantern’s future drug development, standing in as a biomarker to identify new indications. In addition to SMARCB1, Lantern has also included in the most recent corporate presentation experimental results showing that PTGR1 expression correlates with LP-184 efficacy. Higher levels of PTGR1 expression correlate with higher LP-184 activity. LP-184 dependence on PTGR expression was further confirmed with a CRISPR knock-out model where LP184 activity diminished almost entirely when PTGR1 was suppressed.

Exhibit III – LP-184 Activity vs PTGR1 Gene Expression (9)

LP-184 was evaluated in an ex vivo patient derived xenograft model of pancreatic cancer with PARP1, ATR and BRIP1 mutations. Results showed a dose-dependent decrease in tumor cell viability when administered LP-184. Furthermore, the patient had been a non-responder to 5-fluorouracil, irinotecan and oxaliplatin combination.

Exhibit IV – LP-184 Response in Pancreatic Cancer Model (10)

Antibody Drug Conjugates (ADCs)

Last month Lantern announced the launch of an antibody-drug conjugate (ADC) program through a partnership with San Diego-based Califia Pharma. Lantern has matched several approved antibodies with in its portfolio compatible with existing antibodies and linkers using its RADR (11) AI algorithm. Encouraged by Gilead’s $21 billion acquisition of ADC leader Immunomedics (12), Lantern forged a relationship with Califia to link its existing candidates with proven antibodies to address cancers where drug resistance has created an unmet need. Antibody conjugation allows cancer-cell specific targeting of nanomolar-potent LP-184 enabling further efficacy in treatment-resistant cancers.

Using Califia’s linkers, Lantern conducted lab work that demonstrated improved efficacy at lower doses when LP-184 was combined with existing cancer-targeting antibodies. The lower levels of drug also resulted in decreased toxicity. Califia’s patented linkers, payloads and conjugations provide a construct to combine approved immuno-oncology antibodies with Lantern’s alkylating and DNA damaging agents. ADC development will target both solid tumors and blood cancers where drug resistance and systemic toxicity are key issues. Lantern’s LP-100 is also being considered for the approach using ADCs.

Antibodies

Antibodies are proteins produced by B-lymphocytes in response to foreign antigens, most commonly bacteria and viruses as a part of the immune response. These biologics are often thought of as flags to mark pathogens for sequestering and destruction with the shape of the antibody binding site determining its specificity. Antibodies are engineered to target specific antigens, which include proteins, sugars or even nucleic acids. In addition to foreign immunogenic agents such as bacteria and viruses, antibodies can identify and bind to antigens, receptors or epitopes specific to cancer cells, allowing for targeted identification of malignant cells.

Exhibit V – Antibody Drug Conjugate (13)

Linkers

When the antibody is linked to a payload, which can be either a cytotoxic agent or a drug, it is termed an antibody drug conjugate (ADC). The ADC is able to bind to the cell, providing accurate delivery of the conjugate to the desired cell. Frequently, the ADC is endocytosed where the link is cleaved and the payload released. Linkers attach to amino acids on the antibody, frequently via thiol chemistry with surface cysteines or lysines. Linkers are critical to the success of the ADC and their type determines when the cytotoxic payload will be released.

Califia Pharma

Califia Pharma offers a portfolio of linker strategies that complement Lantern’s LP-100 and LP-184, allowing for lower concentrations and increased specificity. The antibodies that Lantern is considering in conjunction with its candidates are as yet unidentified but will soon be off patent, providing well-understood, battle-tested and potentially less-expensive biologics as part of the combination therapy for cancer indications.

Choice of linkers depends upon both the antibody and payload. Califia has identified and documented many linkers amenable to conjugate LP-100 or LP-184. The original researcher for LP-184 is Michael Kelner, M.D., professor at the University of California San Diego Medical Center and CEO of Califia (14). The choice of linkers is important for compatibility and internalizing the payload inside the cell.

Preliminary data from Lantern’s ADC program shows promise when compared to other, well-known ADCs. Lantern’s ADC, LP-A18 showed complete control at around 300ng/mL when compared to Adcetris and Kadclya, which were unable to control at doses as high as 1000 ng/mL.

Exhibit VI – LP-A18, Adcetris and Kadclya Compiled Data Comparison (15)

ADCs are not only therapeutically exciting, but relevant. AstraZeneca and Daiichi Sankyo received FDA approval of Enhertu for gastric cancer on January 18, 2021, and received approval in the EU for breast cancer two days later. Enhertu had already been approved in the US for HER2+ metastatic breast cancer in December 2019 (16). ADC Therapeutics (ADCT) is expected to file BLA for their lead candidate, loncastuximab tesirine (Lonca). Recent industry successes should support investor enthusiasm in the space, supporting Lantern’s value in the market. The ADC program is expected to enter the clinic as early as 4Q:21.

Lantern is considering the pursuit of multiple targets in the ADC combination program including colorectal, pancreatic, lung and ovarian cancer. From 5% to 10% of these cancers present the targeted biomarkers and compose the addressable market for the program.

Lantern Clinical Pipeline

Lantern’s pipeline has been updated as of the most recent corporate presentation to include work in the ADC programs and to update Oncology Venture’s change of company brand to Allarity Therapeutics.

Exhibit VII – Lantern Pharma Pipeline (17)

Historical and Forward Looking Milestones

‣ IPO and initiation of trading on the NASDAQ – June 10, 2020

‣ LP-300 cGMP contract – July 2020

‣ Regulatory interaction for Phase II trial design, LP-300 – 2H:20

‣ Exceed 1.1 billion RADR data points – October 2020

‣ Joint update meeting with Allarity Therapeutics (LP-100) – 4Q:20

‣ Analyst day update call – 4Q:20

‣ Phase II of LP-100 in mCRPC readout – 1H:21

‣ Phase II launch of LP-300 – 2021

‣ Phase I launch of LP-184 – 4Q:21 to 1Q:22

Summary

With the recent $69 million raise, Lantern is now equipped to complete clinical trials in both GBM and ATRT, and Phase I trials in its ADC program. The raise has reduced risk related to financing and liquidity for the next few milestones, especially in the context of economic uncertainty. The recent launch of the ADC program will not only be a therapeutic complement for Lantern’s nanomolar-potency candidate, LP-184, but should support Lantern’s valuation as large pharmaceutical firms have recently commercialized ADCs with great success and a bright future. The ADC market is estimated to reach $3 billion by 2025 (18). Commencement of Phase I ADC trials are expected as early as 4Q:21. Additional capital and new programs support an increase in target price which we discuss in detail in our previous report. The addition of new capital and new programs has increased our valuation to $30 per share. For added detail on Lantern’s proprietary AI development platform, RADR, and for background on indications and Lantern’s clinical candidates, please refer to our initiation.

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1. Lantern’s proprietary AI platform is entitled Response Algorithm for Drug Positioning and Rescue (RADR).

2. Atypical Teratoid Rhabdoid Tumors (ATRT) Diagnosis and Treatment – National Cancer Institute

3. Rhabdoid tumor | Genetic and Rare Diseases Information Center (GARD) – an NCATS Program (nih.gov)

4. Atypical Teratoid Rhabdoid Tumor (ATRT) – St. Jude Children’s Research Hospital

5. Atypical Teratoid Rhabdoid Tumors (ATRT) Diagnosis and Treatment – National Cancer Institute

6. Lantern Pharma Company Overview January 11, 2021

7. Developing Products for Rare Diseases & Conditions | FDA

8. Lantern Pharma Company Overview January 11, 2021

9. Lantern Pharma Company Overview January 11, 2021

10. Lantern Pharma Company Overview January 11, 2021

11. Lantern’s proprietary AI platform is entitled Response Algorithm for Drug Positioning and Rescue (RADR).

12. Immunomedics developed next-generation ADC technology and obtained FDA approval for Trodelvy in metastatic triple negative breast cancer in April 2020.

13. Polakis, Paul. Antibody Drug Conjugates for Cancer Therapy. Pharmacological Reviews, January 2016.

14. https://ucsdnews.ucsd.edu/archive/newsrel/science/mdmushrm.htm

15. Lantern Pharma Company Overview January 11, 2021

16. FDA approves new treatment option for patients with HER2-positive breast cancer who have progressed on available therapies | FDA

17. Lantern Pharma Company Overview January 11, 2021

18. https://www.marketwatch.com/press-release/antibody-drug-conjugate-market-size-estimated-to-reach-33561-million-by-2025-2020-12-09

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