As I have tweeted in the past three weeks, I have been adding to my Curis position post-ASH. I have been watching this stock for a while but waited till CUDC-907 data at ASH. I hold a mid-sized position at an average of $2.6 Wanted to share with you all why I think this could be a good candidate for a short-term bounce trade.
Briefly, CRIS has one FDA approved product Erivedge (vismodegib) for advanced basal cell carcinoma (aBCC) in collaboration with Genentech. Curis receives about 5-10% royalty from Genentech on the sales. The product launched in early 2012 and has been trending well. Complete 2013 numbers are not out yet but has already crossed an impressively quick $50M+. In 2012, it was top 10 best selling drug that was launched in 2012 with $30M. Obviously the uptake is high and it is estimated to reach $350M annual peak sales for just aBCC indication.
IMO, Erivedge is the base case for the CRIS bounce trade. As stated above, Erivedge currently is only approved only for advanced basal cell carcinoma (aBCC) but is currently working on getting approval for less severe forms of BCC under collaboration with Genentech and NCI. aBCC is rare with small population so a label expansion beyond aBCC can mean much higher peak sales for Erivedge. Genentech recently completed a Phase II clinical trial of Erivedge in patients with operable nodular BCC, which is a less severe form of the disease and accounts for a significant fraction of the approximately 2-3 million BCC cases diagnosed annually in the U.S. Erivedge can potentially be a safe and cost effective alternative to surgical procedure. If Curis and Genentech manage to expand Erivedge label, this can provide a big upside to the stock. We should get the data in Q1 14 and it is important to watch this catalyst that could trigger a bounce.
Moreover, Genentech and Curis also announced trials in the AML/MDS indication. Ali Fattaey, Ph.D., Curis’ President and Chief Operating Officer claims: “We believe that inhibition of Hedgehog pathway signaling by Erivedge has the potential to provide benefit for patients with AML and MDS. Specifically, unlike basal cell carcinomas that are driven by mutations in the Hedgehog pathway, AML and MDS represent cancers where ligand-dependent abnormal signaling within this pathway is associated with the disease.” This trial is still in it’s early stages Ph 1B/2 but any success here will add significant value to CRIS.
Just looking at what is ahead for Erivedge in aBCC and beyond, I believe CRIS is already undervalued here at $250M market cap with potential $50M in milestone payments pending and 5-10% royalty on sales. Thus, Erivedge provides a base for CRIS which is great since rest of CRIS’s pipeline is highly speculative.
Besides Erivedge, Curis is testing proprietary, clinical-stage small molecules for various cancers, including an oral antagonist of inhibitor of apoptosis (IAP) proteins, CUDC-427, and a dual phosphoinositide 3-kinase (PI3K) and histone deacetylase (HDAC) inhibitor, CUDC-907. The company also has an EGFR/Her2 and HDAC inhibitor, CUDC-101, in preclinical development.
Firstly, CUDC-907 is an early stage PI3K/HDAC inhibitor drug. Early data was presented at ASH which wasn’t as exciting as many investors had hoped causing weakness in the stock (and possibly a great buying opportunity). They presented data in only 13 patients with 7 patients at 30mg QD, and 3 patients at 60mg QD and 3 at BW. There was 1 PR and 7 with stable disease. The safety data was good (BiWeekly/BW showed better tolerability) and CRIS will continue to play around with dose escalations in 2014. CRIS is planning to escalate dosing up till 180mg so there is still a lot of mystery yet to be unlocked. Obviously CUDC-907 is too early to make any meaningful predictions and I don’t believe this drug will contribute much to a stock rebound in 2014 but there is a a big potential in CUDC-907 beyond 2014 but CRIS has tons to prove. Note that there is a slight chance CRIS might have something on 907 to show at ASCO but wouldn’t bet on it.
Secondly, Debio 0932 is an oral small molecule inhibitor of Heat Shock Protein 90 (HSP90) that is being developed by Curis’ licensee Debiopharm and is currently the subject of an ongoing Phase I/II clinical study in patients with advanced lung cancer. Debio 0932 is also in its early stages with data not expected till next year so I’m going to exclude this along with CUDC-907 as a potential contributor to a stock rebound in 2014.
Last but not least, CUDC-427 (along with Erivedge) can potentially contribute to a significant rebound in CRIS shares in the short-term. Briefly, CUDC-427 is an orally bioavailable small molecule that is designed to promote cancer cell death by antagonizing IAP proteins. CUDC-427 was licensed from Genentech but Curis has the sole right and responsibility for all research, development, manufacturing and commercialization activities related to CUDC-427. At ASCO 2013, results from old Genentech 42 patient open-label study was presented which showed encouraging single-agent activity and safety data. Data was also presented at ASH. CUDC-427 has the potential to be best in class IAP antagonist with broad applicability to various forms of genetically defined cancer especially for patients for whom Chemotherapy no longer works. What differentiated CUDC-427 is that it is potential to target broader range of IAPs than other IAP antagonist drugs.
The market potential for CUDC-427 is huge but bad news struck CRIS in Nov of last year when FDA put CUDC-427 open-label Phase I study on partial hold due to a death of a patient who progressed to liver failure approximately one month following the discontinuation of CUDC-427 dosing. The study was being conducted on patients with advanced and refractory solid tumors or lymphomas. The study was designed to determine the maximum tolerated dose (MTD) and recommended single-agent phase 2 dose of CUDC-427 using a continuous, twice-daily treatment schedule. As per the partial hold, no new patients can be enrolled in this trial till additional data and analysis on patients treated is submitted along with a proposed protocol amendment. Obviously, CRIS shares took a beating on this news.
IMO, there is a good chance that FDA might remove the partial hold once CRIS submits the safety analysis data as well as potential protocol adjustment. The breast cancer patient who died experienced AST and ALT liver enzyme elevation that did not resolve after CUDC-427 discontinuation. After CUDC-427 discontinuation, the patient’s liver enzyme level continued to rise along with rise in bilirubin levels which lead to liver failure. This was not observed in other patients. There is a good chance that this did not occur because of CUDC-427. CRIS was supposed to submit this analysis in 2013 YE. IMO, it is likely that CRIS will manage to provide evidence that this failure did not occur due to CUDC-427 and maybe propose a dosing change which will likely convince the FDA to remove the partial hold. This can be a significant catalyst given the immense potential CUDC-427 has. Assuming CRIS executes this on time, we will get an update from FDA in the 1H of 2014. If the hold is removed, CRIS shares might fill the gap back up to the $4 level providing us a significant bounce-trade opportunity.
As stated above, Erivedge provides a base base for CRIS with growing sales and many exciting developments in early 2014 including label expansion data. Secondly, we might get some more additional insights on CUDC-907 at ASCO which might instill confidence into investors and contribute to a bounce. Lastly, I anticipate news on CUDC-427 clinical hold in early 2014 with high chance of hold removal which can lead to a significant increase in the stock price given the current valuation gives little respect to CUDC-907 and CUDC-427
DISCLOSURE: Long $CRIS
DISCLAIMER: The above is my opinion intended for informational purpose only and should not be used as professional financial advice. The above is not a recommendation to buy, sell, or short stocks or options. By reading the above text, you agree that any trades or investments you make are solely your responsibility. I cannot assure you that the above information is accurate. Trading stocks or options can be risky. Any profits, losses, or break even are solely your responsibility. Please consult a certified professional before buying or selling any such stocks or options.