This article is the second one in my series of initiation of coverage on Moderna Therapeutics (NASDAQ: MRNA). In the first part of this coverage, I laid out my core five principles why I consider this company, a recent IPO that was spun out of Harvard Labs as a good investment. These include: (a) the use of data analytics and proprietary software to create mRNA sequences, (b) novel, proprietary lipid nanoparticle delivery technology, (c) proprietary manufacturing process and a 200,000 square foot new manufacturing facility, (d) partnerships with big pharma adding confidence to the company’s technology, and (e) experienced management with a successful track record. The stock has risen approx. 20% in past week since my article was published on FATrader.com.
In the first article, I also described in detail some important parts of the pipeline including the use of mRNA technology in protein therapeutics. In the second article, my focus will be describing the oncology pipeline of the company, which I consider as one of the large future revenue drivers. The oncology pipeline of the company is very interesting, for example, a cancer vaccine containing mRNA coding for multiple neoantigens, an area of oncology which I have become very interested in recently during my coverage of a recent IPO, Gritstone Oncology (NASDAQ: GRTS). Moderna is also attempting to develop a cancer vaccine using mRNA against KRAS, a therapeutic target which has been considered undruggable till now.
Previous attempts to develop cancer vaccines were unsuccessful due to several reasons, for example, they were not combined with checkpoint inhibitors or they utilized peptide fragments, which does not mimic the natural processing and presenting of antigens by the immune system.
Neoantigen pipeline: a personalized approach to cancer immunotherapy
Moderna’s approach is different because it is using mRNA to express the neoantigens found in a particular cancer to elicit an immune response by the T cells against these neoantigens. Neoantigens are unique proteins which are particular to a tumor and may be even different from one patient to another with the same cancer. These neoantigens are coded by certain mutations which are present within the tumor. Moderna is combining these neoantigen vaccines with checkpoint inhibitors, thus increasing the probability of success. In addition, a single mRNA can be engineered to code for multiple neoantigens. These mRNAs coding from neoantigens are also processed by the patient’s endogenous cellular processing and presentation to the patient’s immune system.
MRNA 4157 and NCI-4650:
It consists of an mRNA that codes for up to 34 neoantigens which can elicit both CD8 and CD4 T-cell responses. The delivery system consists of proprietary lipid nanoparticles.
In preclinical studies in mice, the T cell response to the above molecules was significantly higher than the response to an adjuvanted peptide (see the image below).
MRNA 4157 is being tested in a phase 1 open label, multicenter trial in escalating doses both as a monotherapy as well as in combination with Keytruda in multiple solid tumors including non-small cell lung cancer, small cell lung cancer, melanoma, bladder cancer, and head and neck cancer. Thirty-three patients have been dosed so far: 13 patients as monotherapy and 20 patients with combination therapy. In the dose escalation part as monotherapy, antigen-specific T cell responses have been detected (see the image below).
Moderna has partnered with Merck (MRK) in this indication. Both the companies have submitted a protocol to the FDA for a randomized phase 2 study for mRNA 4157+Keytruda as postoperative adjuvant therapy with the control arm as Keytruda alone. The initial indication is cutaneous melanoma after surgical resection with high chance of recurrence. The primary endpoint is relapse free survival at 12 months. The dosing is q3weekly.
In addition, NCI 4650, a similar compound, is being tested by the National Cancer Institute in an investigator initiated, single arm, open label trial in 20 patients with advanced metastatic disease.
Solving the KRAS ‘undruggable target’ problem; use of mRNA against KRAS: the 'Everest of therapeutic targets'
MRNA 5671 or vaccine against KRAS oncogene protein
Point mutations in KRAS oncogene may be seen in 22% of human cancers, including colorectal, non-small cell lung cancer, and pancreatic cancers. KRAS has been considered an undruggable target so far and multiple efforts to develop a therapy against it have failed. No company has attempted an mRNA therapeutic against KRAS.
Moderna’s approach is unique because it is using mRNA that codes for neoantigens peptides containing common KRAS mutations (see the image below).
This whole program is now sponsored and funded by Merck. The molecule is being tested as monotherapy as well as in combination with Keytruda. MRNA 5671 contains mRNA that codes for 4 most common KRAS mutations, and is delivered using Moderna’s proprietary LNP particle.
The proof of concept has been shown in preclinical studies in mice by active T cell response to KRAS mutation 1 peptide coded by MRNA 5671 (see the image belowA phase 1 multicenter, dose escalation, and dose expansion, open-label trial is being planned. MRNA-5167 will be delivered I/M as monotherapy and in combination with Keytruda. An IND has been filed and is open.
Intratumoral oncology pipeline:
I will focus on the two molecules of this pipeline which I consider as the most important.
MRNA 2752 or Triplet T cell Stimulator
A multiple mechanism T cell stimulator showing a 100% complete response in preclinical studies
It contains an mRNA that codes for three different proteins that stimulate T cells:
- OX40L: T cell co-stimulator.
- IL-23 and IL-36-gamma: these are inflammatory cytokines that cause an inflammatory response within the tumor.
The purpose of this triplet therapy is to stimulate T cell responses against the tumor by transforming cold tumors into hot tumors (see the image below).
Excellent results were seen in mouse models of cancer with 100% complete response in twenty mice (see the image below) .
Moreover. a single dose of the triplet therapy was found to have synergy with checkpoint inhibitors showing complete response rates of 70% or higher. The effect of the triplet was higher than doublet or monotherapies and was seen also in tumors distal to the site of injection called absopal effect.
MRNA 2752 is being tested in a phase 1 human study in three arms, as a monotherapy, in combination with durvalumab (anti-PD1) and the third arm, in combination with tremelimumab, anti-CTLA4 antibody.
Solving the problem of systemic toxicity of IL-12 through mRNA therapeutics:
70% complete response in preclinical studies (checkpoint inhibitor combo) in refractory cancers
IL-12 is very potent in stimulating T cells against cancer, however, systemic administration of IL-12 has resulted in toxicity.
MEDI1191 consists of a mRNA sequence coding for interleukin-12A as well as IL-12B
(see the image below).
In a mouse model of cancer which was refractory to checkpoint inhibitors, the molecule resulted in 30% complete response as monotherapy and complete response rate of 70% or higher in combination with anti-PD1 on checkpoint inhibitors. Moreover, regression of tumors was also seen in tumors which were located distal to the injected tumor site.
This program has been partnered with AstraZeneca who will sponsor and funded the clinical trials. A phase 1 open label, multicenter trial is expected to start soon as monotherapy and in combination with a checkpoint inhibitor. An IND is open.
Moderna is well-funded and the market cap is low considering the large target markets and disruptive mRNA technology
The company is well-funded ($1.5 billion in cash) and peak target sales for its product candidates could be $10 billion-$15 billion in cancers alone. It has no debt. Operating cash burn was approx.. $331M in 2018 and I don’t anticipate any need to raise additional capital till at least the end of 2020.
The target market is approximately 1.6 million new cases of cancer and approx. 600,000 deaths due to cancer just in the US. The race for an ideal combination drug with checkpoint inhibitors to increase their efficacy, especially in cold tumors, is on. An example of the big pharma’s interest in this field can be shown by Bristol-Myers Squibb’s largest biotech licensing deal in the history. BMS paid an eye-popping $1.8 billion in upfront payment to Nektar Therapeutics (including $1 billion in cash). In addition, Nektar will get 65% of the global profit share, a term unheard of in a space where usually the smaller company gets an average of 10-15% of royalties on net sales. NKTR-214 could have $10 billion in sales by 2022. The global size of the checkpoint inhibitor market is expected to exceed $40 billion by 2026 growing at 11.8% annually. I estimate the annual price for a successful immune-onc combination therapy with anti-PD1 checkpoint inhibitors as equal to $120K/year (from the precedent of Yervoy, anti-CTLA4 inhibitor which was used in combination with anti-PD1 Opdivo). From Nektar’s (and previously peak sales estimates for Incyte’s anti-IDO drug), I estimate the target market size for an immuneonc therapy which will be combined with checkpoint inhibitors as between $10 billion to $ 15 billion. Moreover, we also have to add the potential revenue due KRAS target (22% of all cancers) which is successful could add another $5 billion to $10 billion in peak revenue in various cancers). In my previous article, I laid out my investment case how Moderna also has the ability to disrupt the recombination protein and monoclonal antibody approach through its mRNA therapeutics which can even target intracellular proteins (not so far reachable by giving recombinant proteins). In comparison, the current market cap for Moderna is just $8.8 billion. The company is being ignored by investors since many R&D programs are in early stages like phase 1, but it is running 20 programs simultaneously (which is a part of the company’s strategy to reduce biological risk due to the failure of a trial). I am long Moderna stock and added more last week.
I will continue my coverage with a discussion of the last part of the company’s extensive R&D pipeline; infectious disease vaccines- another therapeutic area where it has the ability to disrupt the market through its unique mRNA-based vaccines. Reiterating Buy rating on Moderna’s common stock.
Risks in this investment
While it appears promising, the company's pipeline is still in early stage. Investing in developmental stage biotechnology company is risky and may not be suitable for all investors. It is possible to lose almost the whole capital invested if the clinical trials of a developmental stage biotech company fail. If the clinical trials fail, partners like AstraZeneca or Merck may cancel their partnership deals which may cause the stock price to fall. While the company is well-funded for now and I don't anticipate a need for immediate capital raise for 12 months, its extensive developmental pipeline will need more funding in the future, thus causing equity dilution for common shareholders. Newer therapies like gene therapy and gene editing are on the horizon and it is possible that they may be more successful as one-time treatments compared to Moderna's approach.
This article represents my own opinion and is not a substitute for professional investment advice. It does not represent a solicitation to buy or sell any security. Investors should do their own research and consult their financial adviser before making any investment. Investing in equities, especially biotech stocks has the risk of significant losses and may not be suitable for all investors. While the sources of information and data in this article have been checked, their accuracy cannot be guaranteed.
I/we are long MRNA.