Pipeline: Theseus Pharmaceuticals
Planned $125 million IPO of MA Based Cancer Resistance Company
Theseus Pharmaceuticals recently filed their S-1 with the SEC, planning an $125 million dollar IPO of approximately 8.3 million shares of common stock at an expected range of $14-16 per share, trading under the ticker “THRX”. Additonally, filings suggest an immediate share dilution of $9.16 per share.
In a macro view, Theseus’s therapeutics attempt to address mutations that allow cancers to evade and resist current drug therapies. More specifically, their pipeline largely targets Tyrosine Kinase Inhibitors (TKI’s) and inhibitors of Epidermal Growth Factor Receptor (EGFR).
Proceeds Breakdown:
Theseus has outline the three main areas in which IPO net proceeds will be targeted:
$85 million to development of THE-360
$45 million to development of EGFR inhibitor
$25 million to develop other pan-variant kinase inhibitors
According to their S-1, Theseus believes they have sufficient funds to operate into mid 2024. Of particular interest was their admission that the current financial health of the company would not allow for any current pipeline candidates to make it through regulatory approval. Thus, additional capital is necessary.
Pipeline Summary
I will follow Pipeline demarcations as Theseus markets them, which leaves two main paths (KIT Program for GIST and EGFR for NSCLC).
KIT Program for GIST
The most promising therapy in Theseus’s pipeline is THE-360, a “pan-variant KIT inhibitor” specifically targeted for individuals with advanced gastrointestinal stroma tumors (GIST). KIT, for reference, is a tyrosine kinase.
For Context:
Tyrosine Kinases are mediators within large cellular signaling pathways that are implicated in a variety of cellular processes like growth, differentiation, and metabolism. As you might imagine, when this kinase (fancy word for enzyme involved in regulation of protein “behavior”) goes off the rail via mutation, we see unhealthy types of growth, differentiation, and metabolism, most commonly cancer. Research has now shown us that tyrosine kinases play a very specific and potent role in the development of many types of cancer. These kinases are activated when an outside messenger called a ligand binds to the kinase. In Theseus’s second therapetic, they largely target the specific type of ligand that binds to cells involved in NSCLC (Non-smal cell lung cancer).
Evidently, Theseus has chosen to target a relatively new and promising target implicated in cancer development. KIT is a specific Receptor Tyrosine Kinase that is vital to the functioning of smooth muscle cells in the GI tract. In upwards of 95% of GIST cases, expression of mutated KIT is present, and in the year 2000, KIT was discovered to be the driver of GIST. An important characteristic of KIT mutations that Theseus targets is the consistent region of mutation, which occurs between Exon 11 and Exon 9. If you read Theseus’s literature, they intend to tackle cancer’s that have proven resistance mutations. Essentially, Theseus is targeting a type of GI cancer that has already proven to be hard to treat. This feautre of GIST is derived from the fact that most patients prove to have more than one mutation in the gene, and no drug to date has the selectivity to address both these mutations. Thus, Theseus markets THE-360 as a Pan-KIT inhibotor, addressing a variety of mutations in KIT.
The importance of THE-360? Gist is the most common sarcoma of the GI tract.
THE-360 Efficacy Compared to Competitors
Ripretinib, a product of Deciphera Pharmaceuticals, is the most recent breakthrough in GIST Therapeutics after almost a decade of stasis in drug development. Deciphera is used after a normal regiment of imatinib, sunitinib, and regorafenib have proven to be inaffective in addressing the activating and resistance mutations. THE-360 was more effective than Ripretinib in reducing tumor volume of KIT Ex13, 17, and 18 mutations. In fact, Theseus’s most recent cell line study showed higher efficacy than Repretinib across all mutants.
The next step for THE-360 is a Phase 1 Clinical Trial upon acceptance of a Investigational New Drug Application by the F.D.A.
EGFR for Non-Small Cell Lung Cancer
C797S is the most common mutation in the epidermal growth factor receptor (EGFR). This specific mutaiton is the root cause of resistance to front line therapies of Non-Small Celll Lung Cancer, mainly Osimertinib which is licensed by AstraZeneca. Osimertinib has been approved by the FDA since mid December of 2020. Thus, Theseus is developing a drug to address tumors of patients that have already developed resistance to a recently approved drug. While THE-360 is projected to begin Phase 1 Clinical Trials in early 2022, the EGFR is even earlier in its infancy. Theseus projects it will have a prospect by mid-2022 that will allow it to begin studies that can support its IND application.
Implications of Pipeline Status
At the time of publication, Theseus is a company planning to go public with one therapeutic potentially nearing the beginning of Phase 1 Clinical Trials. Theseus’s evaluation is largely driven by the possibility of THE-360 having favorable Phase 1/2 Clinical Trial results, in hopes of driving early approval by the F.D.A. From a financial standpoint, investors should be largely unconcerned with the negative revenue and net income of Theseus as this is typical of emerging Pharmauetical companies. If anything, the varying circumstances that have led to this financial postion are more pertinent.
More specifically, Theseus specifically outlines in their S-1 how the current financial health of the company doesn’t allow for any therapeutic to make it to market, requiring further infusion of Capital. Of further concern to me is the relative experience of the Operating team, all coming from the same team at ARIAD Pharmaceuticals which licensed 5 clinical stage therapeutics in 20 years.
The strength of Theseus’s research approach is their structure guided drug design. If their two therapeutics in pipeline now prove to be efficacious, it could be easy to see Theseus’s pipeline grow tremendously. It remains hard to predict the future value of the individual therapeutics, their pipeline design, and overall stock price with literally zero clinical data.
In a best case scenario, THE-360 reaches FDA approval rapidly as a reasonable solution to GIST mutations. Strong clinical data that yields this approval would give confidence to investors that pan-kinase inhibitors in this one setting are efficacious, and would thus garner research attention in other organ systems. The capital acquired from the efficacy of THE-360 would allow Theseus to approach respectable revenue marks, and potentially add to their pipeline.
In a worst case scenario (outside of literal clinical failure), Thesues sees only minor improvements in Phase 1/2 Clinical data. THE-360 addresses the weakness of a drug that was only approved just a year ago. Theseus’s hopes for the drug largely hold onto the fact that in clinical trials efficacy holds up and displays exponential utility over exisiting counterparts.
Risk Assessment
Theseus Pharmaceuticals, with a projected IPO on October 7th, 2021, seems at best a long term play for a small cap biotech company. They go to market with no clinical data, and require massive capital to reach a stage of research and development that correlates well with long-term health of a pharma company.