CTI BioPharma: A Nano Cap With Interesting Prospects (NASDAQ:CTIC)

CTI BioPharma: A Nano Cap With Interesting Prospects (NASDAQ:CTIC)

Introduction

Shares of CTI BioPharma (NASDAQ:CTIC) has surged this year due to the prospect of getting an accelerated approval for its major product pacritinib. Besides this, the company also participated in the quest to fight Covid-19. Here, it initiated the Phase 3 clinical trial, PRE-VENT, which might bring in results at the end of 2020. However, due to the competitive landscape of Covid-19, we expect the hype to flatten and therefore will focus our research on CTI’s main asset pacritinib for the treatment of myelofibrosis.

Myelofibrosis

Myelofibrosis (MF) is a chronic blood cancer in which excessive scar tissue forms in the bone marrow and impairs its ability to produce normal blood cells. Researchers believe MF may be caused by abnormal blood stem cells in the bone marrow. The abnormal stem cells produce mature cells that grow quickly and take over the bone marrow, causing both fibrosis (scar tissue formation) and chronic inflammation.

The annual incidence of PMF in the United States is approximately one case per 100,000. It is estimated to be 0.3-0.7 per 100,000 for post-PV MF and 0.5-1.1 per 100,000 for post-ET MF



Figure 1 Epidemiology of MF in the U.S.

Figure 2: Symptoms that affect MF patients’ prognosis

Treatment Algorithm

MF patients are classified into two groups: higher risk and lower risk. Risk stratification enables treatment decisions to be made in the context of the individual’s prognosis as Figure 3 demonstrated.

Figure 3: Management of primary myelofibrosis

Allogeneic transplantation is the first-line treatment that can prolong survival and offers the possibility of a cure for medically eligible patients. If not, proceeding with a clinical trial is preferred over existing drugs in the market in the high-risk group. Currently, there are only symptom relief drugs in MF treatment. If the platelet count is too low, alternative approaches – which provide transients benefit but could lead to severe compilations – are the only options available.

Is pacritinib needed?

CTI BioPharma’s strategy for pacritinib (PAC) would be targeting the intermediate- and high-risk MF patients who suffer from severe thrombocytopenia. This is the group of patients that Jakafi and other JAKi drugs have shown limitations. Both Jakafi and Fedratinib are not indicated in patients with platelet count <50,000/mL, which accounted for up to 35% of all MF patients, according to CTI’s estimation. Currently, the FDA agreed to give pacritinib an accelerated review in case of positive trial results, which implies its necessity in the medical field.

Competition

MF market is generally dominated by Incyte’s (NASDAQ:INCY) Jakafi, with a couple of other JAKi competitors. The development of pacritinib could provide more options on the table. However, regarding the vicissitudes of CTI BioPharma as well as pacritinib’s clinical trial progress, it is not likely that the newcomer would be able to threaten Jakafi’s position.

The table below will compare various drugs already being used in the market as well as clinical trial ones.

NAME and MECHANISM

PROS

CONS

Ruxolitinib (JAKAFI from Incyte Pharma)

JAK1/JAK2 inhibitor

  • FDA approved drug for the treatment of patients with intermediate- or high-risk MF.
  • Anemia and thrombocytopenia were the most common adverse events with ruxolitinib but rarely led to drug discontinuation.
  • Ruxolitinib has not been proven to prolong survival in PMF.
  • There are reports of serious bacterial, mycobacterial, fungal, and viral infections linked with ruxolitinib treatment.
  • Potential hepatitis B virus reactivation.
  • Discontinuation of ruxolitinib can be associated with a full relapse of disease symptoms and a development of fever, hypotension, hypoxia, and other manifestations of systemic inflammatory response syndrome.

Fedratinib (INREBIC from Celgene Pharma)

JAK2 inhibitor

  • Fedratinib is approved by the FDA for treatment of higher-risk PMF in 2019
  • Treatment is associated with serious and sometimes fatal Wernicke-like encephalopathy, which put fedratinib on a clinical hold by the FDA in 2013. Then the clinical hold was lifted based on a review of additional data.
  • The risk for a withdrawal syndrome is not well-defined, but caution is warranted.

Pacritinib from CTI Biopharma

JAK2/FLT3 inhibitor

  • PERSIST-2 and PAC203 trials have shown significant efficacy in patients with MF and thrombocytopenia.
  • Higher death rates from intracranial hemorrhage, heart failure, and cardiac arrest in the PERSIST-2 trial prompted the FDA to place a clinical hold on pacritinib in February 2016. However, the clinical hold had been lifted after the submission of additional data from the PERSIST trials.

Momelotinib from Gilead Sciences (NASDAQ:GILD)

JAK1/2 inhibitor

  • Momelotinib was noninferiority compared to Jakafi in terms of the primary endpoint in SIMPLIFY-1, a phase III clinical trial.
  • Jakafi was superior to momelotinib in the key secondary endpoint.
  • Higher rate of infections and treatment-emergent peripheral neuropathy with momelotinib compared to Jakafi
  • Mixed results in clinical trials left momelotinib’s future uncertain.

Scientific aspect

Compared to other drugs in the MF treatment, which are mostly JAK inhibitors, pacritinib has an additional mechanism as it is a JAK2 and FLT3 inhibitor. This gives pacritinib an advantage as the activation of the FLT3 tyrosine kinase potentiates JAK/STAT signaling, thus providing an additional target in MF.

Figure 4: Activated JAK-STAT signaling drives myelofibrosis.

Figure 5: Therapeutic strategies for disease-modifying therapy myelofibrosis.

Clinical trials

Initially, pacritinib was a promising candidate for the treatment of MF. However, these hopes were destroyed as the pivotal Phase 3 PERSIST-2 was put on clinical hold in 2016. Patient deaths were reported related to intracranial hemorrhage, cardiac failure, and cardiac arrest after evaluating results from the earlier Phase 3 trial PERSIST-1.

However, by submitting the final clinical study report from these two trials, PERSIST-1 and -2, and the initiation of another Phase 2 study, PAC203, CTI BioPharma managed to lift the temporary hold. Later, data from PERSIST-2 and PAC203 showed that the initial adverse events, which led to the hold, were comparable to the control group. Despite the negative events, pacritinib showed positive in two large trials against BAT.

Figure 6: Spleen Volume Reduction (SVR) response in all patient populations in PERSIST-1 and PERSIST-2 clinical trials.

Figure 7: SVR response in severe thrombocytopenia MF patients in PERSIST-1 and PERSIST-2 clinical trials.

After receiving top-line data in early 2022 from PACIFICA, pacritinib could potentially receive Accelerated Approval from FDA.

Market potential and financial valuation

Currently, there are no drugs approved for patients who are refractory or become unresponsive to ruxolitinib treatment. Therefore, if pacritinib receives FDA approval, it could be a promising option for second-line MF treatment or even first-line in severely thrombocytopenic patients.

Sell-side consensus shows that the company might hit peak sales of $237.16 million in 2027. Here, it is anticipated that the company would receive approval and start generating revenues from selling pacritinib from 2023 onward. To evaluate possible upsides for the company, we use a more conservative method and estimate the peak sales of pacritinib in three scenarios as follow:

Scenario

Low

Mid

High

Expected peak sales ($, million)

100

150

200

Then, using this model, we estimate the revenues for CTI BioPharma in the upcoming years:

Year

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

Percentage of peak sales (%)

5

20

35

50

65

75

85

90

95

99

100

Expected peak sales ($, million)

Low

5

20

35

50

65

75

85

90

95

99

100

Mid

7.50

30

52.50

75.00

97.50

112.50

127.50

135.00

142.50

148.50

150

High

10

40

70

100

130

150

170

180

190

198

200

Sales margin 65% ($, million)

Low

3.25

13.00

22.75

32.50

42.25

48.75

55.25

58.50

61.75

64.35

65.00

Mid

4.88

19.50

34.13

48.75

63.38

73.13

82.88

87.75

92.63

96.53

97.50

High

6.50

26

45.50

65.00

84.50

97.50

110.50

117.00

123.50

128.70

130.00

From that, we can calculate the NPV of the drug in each scenario:

Scenario

Low

Mid

High

Drug net present value (11% discount rate) ($, million)

222.08

333.12

444.16

Compared to the current market capitalization of $76.66 million, the NPVs show that there is still room for the company’s valuation to increase, even in the case of low peak sales.

Moreover, CTI currently has $70.11 million in cash and $8.8 million in debt. The company has a burn rate of ~$40 million last year. Thus, it is likely that the company has sufficient cash to continue its operation at least until early-2022 before having to raise additional money.

Risk

CTI BioPharma’s share price is dependent on the success of pacritinib. However, the risk is lowered in this case. The drug has managed to produce reliable positive results and manageable adverse events in multiple late-stage trials.

Conclusion

CTI BioPharma is a small biotech company with an interesting drug asset, which might be helpful to patients with MF. If the company receives FDA approval, its valuation could increase substantially, making it an interesting candidate to add to your watch list.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.


Originally published on Seeking Alpha

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