Checkpoint Therapeutics, Inc. (CKPT)
Rating: Buy
Joseph Pantginis, Ph.D.
646-975-6968
[email protected]
Joshua Korsen, Ph.D.
212-715-2886
[email protected]
Matthew Keller,
Ph.D.
212-856-5745
[email protected]
Sara Nik, Ph.D.
212-916-3970
[email protected]
Lander Egaña
Gorroño, Ph.D.
212-916-3977
[email protected]
Boosting IO Approach With New Collaboration; BLA Acceptance Expected Shortly
Stock Data 7/15/2024
Price $2.51
Exchange NASDAQ
Price Target $34.00
52-Week High $3.62
52-Week Low $1.30
Enterprise Value (M) $77
Market Cap (M) $96
Shares Outstanding (M) 38.1
3 Month Avg Volume 387,883
Short Interest (M) 3.83
Balance Sheet Metrics
Cash (M) $18.9
Total Debt (M) $0.0
Total Cash/Share $0.50
Cash (M): Pro forma cash on January 2024 registered direct offering
EPS ($) Diluted
Full Year – Dec 2022A 2023A 2024E
1Q (1.98) (0.89) (0.37)
2Q (1.62) (1.05) (0.29)
3Q (1.20) (0.29) (0.30)
4Q (2.28) (0.70) (0.32)
FY (7.09) (3.17) (1.24)
Revenue ($M)
Full Year – Dec 2022A 2023A 2024E
1Q 0.1 0.0 0.0
2Q 0.0 0.0 0.0
3Q 0.1 0.0 0.0
4Q 0.1 0.0 0.0
FY 0.2 0.1 0.0
December 6, 2022 one for 10 reverse split.
Quarterly EPS may not add to full year due to increases in share count and rounding.
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JUL-23 NOV-23 MAR-24 JUL-24
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Synergistic potential of cosibelimab and Immuncell-LC to be explored in new collaboration. Yesterday, Checkpoint announced that it has entered into a collaboration with GC Cell (144510.KQ; not rated) to explore the combination of Checkpoint’s cosibelimab with GC Cell’s autologous cytokine-induced killer (CIK) T cell therapy, Immuncell-LC. This collaboration aims to evaluate the potential synergy between the two therapies in cancer cell destruction.
The first steps include performing in vitro combo studies, followed by potential in vivo and clinical studies if positive data are obtained.
We welcome this collaboration as it offers another route to expand the potential reach of cosibelimab. By combining cosibelimab with GC Cell’s Immuncell- LC, which is already approved for hepatocellular carcinoma adjuvant treatment and has shown a good efficacy and safety profile, Checkpoint is not only enhancing its therapeutic arsenal but also potentially broadening the spectrum of treatable disease with this approach.
This strategic partnership could lead to increased efficacy and potentially improved patient outcomes. Recall on July 2, Checkpoint resubmitted its BLA to the BLA for cosibelimab in mid-2024, which we believe should
lead to approval by the end of the year (more details about the BLA resubmission can be found below).
We also view this collaboration and combination approach positively, as previous research has shown that antibody-dependent cellular cytotoxicity (ADCC)—the mechanism by which cosibelimab functions—and the CIK T cell response— the mechanism by which Immuncell-LC works—have demonstrated synergistic effects in previous studies through enhanced targeting, immune modulation, and overcoming resistance.
FDA alignment on resubmitted BLA; awaiting acceptance and new PDUFA.
The recently resubmitted BLA is pending acceptance, and we expect a PDUFA date for this year. Recall, a CRL was received in December 2023 for cosibelimab’s BLA for the treatment of patients with metastatic or locally advanced cSCC. Critically, the reason for the CRL was due to findings reported from a multi-sponsor inspection of the company’s third-party contract manufacturing organization (CMO), Samsung Biologics (private). We believe it is important to underscore, the CRL did not state any concerns regarding the clinical data package, safety, or labeling for the approval of cosibelimab. Moreover, the CMO deficiencies cited in the CRL appear to be easily addressable.
With the pending resubmission, we believe that cosibelimab can be approved by the end of the year. Once filed again, the FDA has 30-days to accept for review, at which point Checkpoint should be issued a new
PDUFA date. Of course, while there have been several examples of FDA resource delays, we believe this BLA resubmission should be a relatively simple review from hear. We now look forward to returning to the underlying strong fundamental case that cosibelimab offers up from a therapeutic differentiation standpoint.
A key outstanding question now is the commercial path forward for the asset and in whose hands from a business development standpoint, which believe the company has a high likelihood of delivering.
For definitions and the distribution of analyst ratings, analyst certifications, and other disclosures, please refer to pages 5 – 6 of this report.
Checkpoint Therapeutics, Inc. July 16, 2024
Longer-term data continue to strengthen cosi clinical profile. In July 2023, Checkpoint announced new, longer term data for cosibelimab from its pivotal studies in cSCC. The previous data cutoff was March 2022, and a side-by-side comparison with the new cutoff of January 2023, outlined the table further below, shows that the longer term results demonstrate a deepening of response over time, leading to substantially higher responses rates (ORR, CR). Moreover, the clinical responses remain durable over time with the median DOR not yet being reached in either study group. With regard to the ORR, as both cSCC cohorts have achieved >50% ORRs, we note that no other approved drug in cSCC has achieved this level of response in both indications, even in the most current package inserts for Keytruda and Libtayo that includes their longer term data.
Longer Term Data Comparison Across Cosi-Treated Cohorts
Source: Company material.
Importantly, the updated safety profile across 247 patients enrolled and treated with cosibelimab across cohorts of the ongoing study remain consistent with those previously reported, with only 2% of patients experiencing a severe immune-related AE (irAE) and <1% of patients discontinuing treatment due to an irAE, both results substantially lower than the rates observed with currently approved immunotherapies. We believe this favorable safety profile, owing to cosi’s differentiated MoA, should position the product as a potential best-in-class, preferred immunotherapy to treat the large number of high-risk cSCC patients, such as those with solid organ transplants or autoimmune disease. We reiterate our stance that Checkpoint is strongly positioned deliver a commercial success and expect cosbelimab to take market share away from the Keytruda/Libtayo portion of the
cSCC market based on cosibelimab’s clinical profile. As such, we expect cosibelimab will eventually become the market leader in the overall $1.6 billion and growing U.S. cSCC market opportunity.
Where are we now and where do we think we are going? We think it is an opportune time to highlight where cosibelimab’s profile should differentiate following our projected first approval in cSCC patients. Ultimately, the question comes down to where cosi can fit into the current treatment paradigm of cSCC treatment, with chemo still being the cornerstone therapy despite Keytruda and Libtayo approvals for the indication. As the biotech markets continue to be turbulent, the disconnect between that and Checkpoint’s value proposition continues to be clear, in our belief. These are our projections of what is likely to come for the company: (1) cosibelimab FDA approval in January 2024; (2) acquisition, or at the minimum, a significant partnership for the asset as differentiated checkpoint inhibitors continue to be sought after; and (3) relatively modest market share in the U.S. (20-25% range) could be quite meaningful to Checkpoint; if the company were to proceed in the U.S. on its own (we think unlikely) it would only need a smaller, focused, sales force of about 15 reps, 4 account directors, and 5 MSLs as well as seeking
strategic pricing with payers since roughly 70% of the cSCC population is on Medicare.
Quick refresher on cosbelimab MoA differentiation. With the growing number of approved checkpoint inhibitors, cosibelimab has some differentiated properties that we believe should help garner meaningful market share, and a recently obtained composition-of-matter patent providing cosibelimab with protection until 2038.
Cosibelimab has a similar half-life of two-weeks to others and maintains greater than 99% receptor occupancy, but it also has ADCC activity.
Atezolizumab had its Fc region engineered out, so does not confer ADCC activity. Avelumab has an approximate four-day half-life, though the FDA was concerned about dosing higher and is still dosed every two weeks, which drops the target occupancy to approximately 60%; it has its Fc region intact, though there is sparse evidence to show ADCC activity is present. Safety is key differentiating factor. In addition to cosibelimab’s differentiated mechanism of action (MoA), the asset has shown a well-tolerated adverse profile. Although the cSCC trials are not identical and therefore a direct comparison cannot be made, the table below demonstrates that cosibelimab’s safety profile is on par and or better than other checkpoint inhibitors on the market. ASCO 2022 data demonstrated a remarkably low number of patients (1/78; 1.3%) experiencing grade ≥3 immune-
related adverse events (IRAEs) with cosibelimab, compared to the overall number of grades ≥3 IRAEs observed with Libtayo
(15/115; 13.0%) and Keytruda (6/105; 5.7%) in Study 1540 and KEYNOTE-629, respectively (table below).
H.C. WAINWRIGHT & CO. EQUITY RESEARCH 2
Checkpoint Therapeutics, Inc. July 16, 2024
Cosibelimab Safety Profile Appears irAE Differentiated (Inter-Study Comparisons)
Source: Prescribing labels and company presentations.
We believe reduced IRAEs can be one of many important factors in cosibelimab’s success. In particular, patients with preexistent autoimmune diseases are at risk during CKI therapy, which can be attributed to the patient’s high likelihood to develop severe adverse reactions resulting from exacerbation of their preexisting autoimmune diseases.
Thus, patients with autoimmune diseases have typically been excluded from CKI therapy clinical trials due to the potential for increased toxicity.
Cosibelimab’s impressive safety data help distinguish it from approved checkpoint inhibitors, and may offer a potential option for these patients.
We believe the safety data is one key factor which can help acquire significant market share. In our opinion, these safety data, in addition to its differentiated MoA, support cosibelimab as an attractive therapeutic option for cSCC patients.
Understanding the cSCC market and cosi’s real opportunity of fitting in nicely. Based on American Cancer Society 2021 numbers, there were 10,745 patients with cSCC in the U.S., representing a market of ~$1.6 billion.
The current breakdown of treatment usage according to Definitive Healthcare is as follows:
•
59% of the market by chemotherapy or EGFR inhibitor
•
28% of the market by Keytruda
•
13% of the market by Libtayo
It appears to us that cosibelimab has the opportunity to penetrate the cSCC market on two fronts, which also could provide
an answer as to why the two approved checkpoint inhibitors have not garnered much more market penetration and chemo
remains a mainstay:
•
Cosi could first garner market penetration in the ~60% not treated by checkpoint inhibitors in the U.S.
The safety profile and ADCC component provides an important potential one-two punch by allowing CKI usage in this population not currently served by one. The ADCC component still engages NK-cells, and could be a strong path to efficacy in patients that are immunosuppressed that would not otherwise be candidates for CKIs due to their IRAE profiles. For example, patients with CLL have down-regulated T-cells, though their NK cells retain ADCC
function. Patients with autoimmune disorders could also benefit from cosi CKI treatment as well that may have not been candidates for others.
•
Penetration into the current CKI-treated population could initially be those patients who saw underwhelming efficacy (low response rates or durability).
H.C. WAINWRIGHT & CO. EQUITY RESEARCH 3
Checkpoint Therapeutics, Inc. July 16, 2024
Time to get real cozy with cosi. Recently, Checkpoint announced the highly anticipated pivotal data with cosibelimab (anti-
PD-L1) in patients with metastatic cSCC. The primary endpoint of the study was met (table below), with a 47.4% ORR based
on RECIST 1.1, and the median duration of response has still not been reached (76% of responses remain ongoing).
Durability is exciting to us with the longest response out beyond 32 months. Importantly, data from all 78 patients in the study were on an intent-to-treat basis, and were analyzed by central independent review; there were dropouts prior to the first screen due to COVID-19, which still delivered quite an encouraging result.
Approved CKIs for cSCC
Source: Prescribing labels.
Valuation and risks to price target achievement. We reiterate our Buy rating and $34 price target. We acknowledge the large distance between the current share price and our price target, but highlight two key factors: (1) the low share count significantly impacting our NPV (December 2022 1:10 reverse split); and (2) consideration of the implied market cap of approximately $1 billion off of fully diluted shares representing approximately only 1x our projected WW peak revenue estimates for cosibelimab in cSCC only. Our valuation is based on our clinical net present value (NPV) model, which is currently driven solely by cosibelimab
in cSCC.
We believe potential upside exists not only from additional market penetration into cSCC, but also the addition of additional indications, such as NSCLC and beyond as comp Libtayo continues to expand its market reach, and cosibelimab could represent a formidable competitor based on the asset’s mechanism of action and Checkpoint’s pricing strategy, if approved.
This model allows us to flex multiple assumptions affecting a drug’s potential commercial profile. Factors that could impede reaching our price target include failed or inconclusive clinical trials or inability of the company to secure adequate funding to progress its drugs through the development pathway.
H.C. WAINWRIGHT & CO. EQUITY RESEARCH 4
Checkpoint Therapeutics, Inc. July 16, 2024
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H.C. WAINWRIGHT & CO, LLC RATING SYSTEM: H.C. Wainwright employs a three tier rating system for evaluating both the potential return and risk associated with owning common equity shares of rated firms. The expected return of any given equity is measured on a RELATIVE basis of other companies in the same sector. The price objective is calculated to estimate the potential movements in price that a given equity could reach provided certain targets are met over a defined time horizon.
Price objectives are subject to external factors including industry events and market volatility.
RETURN ASSESSMENT
Market Outperform (Buy): The common stock of the company is expected to outperform a passive index comprised of all the common stock of companies within the same sector.
Market Perform (Neutral): The common stock of the company is expected to mimic the performance of a passive index comprised of all the common stock of companies within the same sector.
Market Underperform (Sell): The common stock of the company is expected to underperform a passive index comprised of all the common stock of companies within the same sector.
Rating and Price Target History for: Checkpoint Therapeutics, Inc. (CKPT-US) as of 07-15-2024
50
40
30
20
10
0 Q2 Q3 2022 Q1 Q2 Q3 2023 Q1 Q2 Q3 2024 Q1 Q2 Q3
BUY:$17.00
09/29/20 BUY:$26.00
01/25/22 BUY:$76.00
12/23/22 BUY:$34.00
04/28/23
Investment Banking Services include, but are not limited to, acting as a manager/co-manager in the underwriting or placement of securities, acting as financial advisor, and/or providing corporate finance or capital markets-related services to a company or one of its affiliates or subsidiaries within the past 12 months.
Distribution of Ratings Table as of July 15, 2024
IB Service/Past 12 Months
Ratings Count Percent Count Percent
Buy 554 87.94% 134 24.19%
Neutral 69 10.95% 4 5.80%
Sell 1 0.16% 0 0.00%
Under Review 6 0.95% 1 16.67%
H.C. Wainwright & Co, LLC (the “Firm”) is a member of FINRA and SIPC and a registered U.S. Broker-Dealer.
I, Joseph Pantginis, Ph.D., Joshua Korsen, Ph.D., Matthew Keller, Ph.D., Sara Nik, Ph.D. and Lander Egaña Gorroño, Ph.D. , certify that 1) all of the views expressed in this report accurately reflect my personal views about any and all subject securities or issuers discussed; and 2) no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report; and 3) neither myself nor any members of my household is an officer, director or advisory board member of these companies.
None of the research analysts or the research analyst’s household has a financial interest in the securities of Checkpoint Therapeutics, Inc. (including, without limitation, any option, right, warrant, future, long or short position).
As of June 30, 2024 neither the Firm nor its affiliates beneficially own 1% or more of any class of common equity securities of Checkpoint Therapeutics, Inc..
H.C. WAINWRIGHT & CO. EQUITY RESEARCH 5
Checkpoint Therapeutics, Inc. July 16, 2024
Neither the research analyst nor the Firm knows or has reason to know of any other material conflict of interest at the time of publication of this research report.
The research analyst principally responsible for preparation of the report does not receive compensation that is based upon any specific investment banking services or transaction but is compensated based on factors including total revenue and profitability of the Firm, a substantial portion of which is derived from investment banking services.
The firm or its affiliates received compensation from Checkpoint Therapeutics, Inc. for non-investment banking services in the previous 12 months.
The Firm or its affiliates did receive compensation from Checkpoint Therapeutics, Inc. for investment banking services within twelve months before, and will seek compensation from the companies mentioned in this report for investment banking services within three months following publication of the research report.
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