Description

Corvus Pharmaceuticals 

Corvus (“CRVS”)  is advancing a potentially best in class anti-CD73 monoclonal antibody (mAb) in solid tumors and trades at a negative enterprise value.  The adenosine target CD73 was recently validated in a large, well-controlled randomized Phase 2 clinical trial readout executed by Astrazeneca called The COAST Trial (COAST). Our thesis is Astrazeneca’s  (AZN) COAST trial data validates CD73 in a meaningful way and Corvus is a significant beneficiary.  The broader adenosine class continues to be validated by large pharma licensing deals.  While CRVS’ anit-CD73 mAb called Mupadolimab (MUPA) should drive the bulk of company’s intrinsic value, there is an unappreciated pipeline including an ITK inhibitor (CPI-818), Ciforadenant an adenosine A2A receptor antagonist as well as a 46% ownership and board control of Angel Pharmaceuticals its Chinese subsidiary which is valued >$100M.  Comparable companies with similar probabilities of success trade for significantly more CRVS has multiple assets which we believe will unlock shareholder value.

Mupadolimab and the ATP/Adenosine Axis

Various biotech companies are advancing therapies that block adenosine which is known to be immunosuppressive in the tumor microenvironment.  Several targets involved in the pathway include CD39, CD73 and adenosine itself.  Corvus’s lead asset is an anti-CD73 mAb called Mupadolimab.  MUPA’s key differentiating feature versus other anti-CD73s is the dual property of CD73 blockade and ability to stimulate B-Cells. Antibodies modulating B-Cell function have been highly successful.  MUPA greatly increases the expression of CD69, a marker of B-cell activation compared to Oleclumab, AZN’s anti-CD73 antibody. Despite the array of companies interrogating CD73, data had not provided strong supporting evidence until AZN’s COAST data proved highly statistically significant with a Progression Free Survival (PFS) Hazard Ratio of 0.44.   

Astrazeneca COAST trial data for Oleclumab, its anti-CD73 

At the ESMO conference in September 2021, Astrazeneca shared phenomenal data on its anti-CD73 Oleclumab (O).  In a front-line randomized control trial of 127 patients with NSCLC study comparing AZN’s anti PD-L1 inhibitor Durvalumab (brand name Imfinzi) plus Oleclumab vs. Durvalumab (D) alone, the Oleclumab arm significantly outperformed. The confirmed Overall Response Rate (ORR) in the combo D+O arm was 30% vs. 17.9% in the mono D arm.  The confirmed + unconfirmed ORR in the combo D+O arm was 38.3% vs 25.4% in the mono D arm. Further, the Progression Free Survival Hazard Ratio was 0.44 for the Oleclumab arm.  There were no additional adverse events in the Oleclumab arm. This is incredible data for Oleclumab and AZN announced it is moving into a Phase 3 trial. Note, there is a third arm in COAST comparing Monalizumab (M), an NKG2A inhibitor not discussed in this write-up which also produced impressive results. 

COAST ESMO Data

While the COAST data was fantastic on a stand-alone basis, bears have pointed to a perceived underperformance of the Durvalumab arm in COAST relative to its prior landmark PACIFIC trial Durvalumab arm.  In PACIFIC the D arm had a PFS of 16.9 months vs. the D arm in COAST which had a PFS of 6.3 months.  Cross trial comparisons are problematic as baseline characteristics and other factors do not match.  Hence, the gold stand is a randomized controlled trial, which is exactly what we have in COAST.  The COAST data should stand on its own.  However, recognizing investors would flag this disparity AZN specifically addresses the question and AZN provided a data analysis comparing the subset of PACIFIC patients that match the baseline characteristics of patients in COAST.  The analysis showed identical ORRs of 24.6% in each arm and PFS-10 month of 38% in COAST D and 44.6% in PACIFIC D.  (see below). AZN strongly believes in the Oleclumab data and has gone out of its way to illustrate a match control, which we think impairs the bear case.  

Mupadolimab to date

Corvus initially began to reflect AZN’s COAST data in its valuation as CRVS stock price moved from $2 to over $9 in weeks following the data release.  Owing to poor communication around MUPA’s expectations and a treacherous biotech market, Corvus has round tripped all price gains and is back to the low $2s/share at the time of this writeup.  Corvus presented early data for MUPA at SITC in November 2021 which disappointed the market for a few reasons:

• Management had pointed to a 20% ORR bar for success.  This guidance was both aggressive and not intended to be applied to the early Phase 1 data which was the subject of the SITC presentation.  The actual SITC data showed some Stable Disease and tumor regression but no Partial Responses (see below).  The point of the early phase 1 data is there was some signal of efficacy.

• MUPA is being studied in PD-(L)1 experienced (failures) patients in HNSCC and NSCLC.  The SITC MUPA data was median 4th line patients vs. Oleclumab in COAST, which was frontline checkpoint naïve.  These are not remotely comparable patient populations.  Later line therapy has a much lower bar for success in terms of response rates and survival. Investors failed to understand this.

Why the data should improve:

• The pivotal trial will be run in frontline NSCSC like Oleclumab. Corvus has outlined the trial design for a P2/3 NSCLC MUPA+Pembro in Stage IV frontline checkpoint naïve patients, a patient population closer to COAST. The trial is expected to begin in 2022

• Anti-CD73 therapies have shown efficacy in combo with PD-(L)1 checkpoints. Only 4 out of 16 patients shown in the SITC data had a PD-(L)1 checkpoint combined with MUPA.

• MUPA expansion cohorts in PD-(L)1 experienced HNSCC and NSCLC will be combo PD-(L)1+MUPA and are beginning to enroll. This could provide more meaningful data in the target patient population with the correct dosing paradigm.  

• Data updates from the MUPA expansion cohorts will be coming in 2022

Competitive Landscape

Competition in the anti-CD73 space is shown in the table below. For the moment, MUPA is second behind Oleclumab:

Deal validation

In addition to the programs listed in the table above, Arcus Biosciences has an anti-CD73 Quemliclustat (Quemli) in P2 pancreatic ductal adenocarcinoma (PDAC) that was part of a recent deal with Gilead.  Gilead exercised its option to co-develop/co-commercialize Quemli (CD73), Etrumadenant (A2AR/A2BR Adenosine) and Domvinalimab (TIGIT) for an additional $725M exercise price. GILD/RCUS deal. This was a follow-up to the initial GILD/RCUS collaboration in May of 2020 which netted a $200M upfront payment and a $175M equity investment  

Despite the disastrous 2021 performance of small and smid-cap biotech over the last 12 months, immuno-oncology targets continue to be acquired and or partnered at a rapid pace. Throughout 2020 and 2021 CD47 was validated: 

• Gilead acquired CD-47 targeted Forty Seven (FTSV) for $4.2B

• Pfizer acquired Trillium in a $2.2B deal PFE/TRIL deal  

In addition, TIGIT was validated with multiple large partnerships examples.  TIGIT and Adenosine are being run in a number of combination trials including the RCUS programs and the ITEOS programs. 

• GSK/ITOS ($625M upfront+ $1.45B milestones) GSK/ITOS deal   

• ITOS’s primary focus is now interestingly on its A2AR Adenosine targeted drug, Inupadenant

• BMY/AGEN  ($200M upfront +$1.36B milestones) BMY/AGEN deal   

We think the deal making for the Adenosine axis will continue and Corvus is a prime candidate. 

Management- Richard Miller History

Corvus founder and CEO has an impressive history of success in biotech.  He co-founded IDEC Pharma and led the research efforts in the development of Rituximab a multibillion-dollar mega blockbuster in hematological cancers and IDEC later merged with Biogen in a $6.8B deal.  Richard co-founded Pharmacyclics and led the initial discovery and development of the first approved BTK inhibitor ibrutinib.  Pharmacyclics was later acquired by AbbVie for $21B in March of 2015 for ibrutinib.  Richard’s focus on B-Cell cancers, which are Ibrutinib’s indications, provides additional validation of Richards dual mechanism of action of both CD73 and B-Cell activation.  It’s surprising how little attention Corvus gets on Wall Street given the Millers’ credibility. A recent somewhat article on Richard is worth a read: Richard Miller BioSpace article. 

Richard has also been an open market buyer of CRVS stock. He owns approximately 1.3M shares outright, including 100K shares purchased at $3.50 in February 2021.  Combined with another 1M stock options, he controls approximately 5% of CRVS.

Additional pipeline

Beyond  MUPA, Corvus is developing an Adenosine A2AR antagonist Ciforadenant, a first in class ITK inhibitor CPI-818, an Adenosine A2BR antagonist, and an Anti-CXCR2

CPI-818 ITK inhibitor

CPI-818 in an internally developed, first in class ITK inhibitor.  Following the success of BTKs, which is a class Richard Miller helped create, CPI-818 is a T Cell version of a BTK (which acts in B Cells).  Corvus ran an initial P1/1b dose escalation study in relapsed/refractory T Cell Lymphoma patients with results presented at ASH 2020.  There was a 28% ORR including 1 CR and 1 PR in the 7 evaluable PTCL patients. There was also a CR in the 11 CTCL patients. Given the significant T cell lymphoma population in China, CPI-818 will be run in China through its Angel Pharma subsidiary where it has a new Chinese IND for treating PTCL patients.

Ciforadenant

Ciforadenant was the lead therapy when CRVS IPO’d. It’s the only in-licensed therapy at Corvus (from Vernalis).  It is an adenosine receptor inhibitor like the lead therapies from ITOS and RCUS and as in the same pathway as CD73 as described above. CRVS developed a companion biomarker, Adenosine Gene Signature (AdenoSig) to identify patients most likely to response to treatment. At ASCO 2020, ciforadenant showed a 17% ORR (5/30) in AdenoSig positive R/R, checkpoint experienced RCC patients. There are no current trials underway for Cifro, but CRVS is working on a collaboration with the Kidney Cancer Consortium to run a Phase 2 in 60 front line RCC patients, AdenoSig positive (their gene biomarker), in combination with a PD-(L)1. 

Chinese subsidiary Angel Pharma- the hidden asset

Angel Pharmaceuticals is a hidden value gem inside of CRVS worth approximately $50M today versus Corvus’s market cap of $100M.  Corvus created Angel as its Chinese based subsidiary to advance and commercialize their therapies in China.  Angel raised $41.5 from external Chinse investors Tigermed, Betta Pharma and Hisun Pharma with a $107M post money valuation. Corvus owns 46% of Angel and controls 3 of the 5 board seats.  Angel controls the Chinese rights to all CRVS programs and has an IND approved by CDE for CPI-818 to run a Phase 2 in PTCL.  PTCL is much more prevalent in China where it represents 26% of NHL.  Corvus expects Angel to IPO on the Hong Kong market and could be a source of non-dilutive capital for the company. 

Capital position/cash burn

At Q3 2021, Corvus has $73M in cash with a $10M per quarter burn rate.  CRVS has been opportunistic at raising cash, including tapping $30M from its ATM on the back of AZN’s Oleclumab CD73 data.  The company has ample runway for the next couple years and could raise additional non-dilutive capital by monetizing Angel Pharma or licensing pipeline assets. 

Valuation/Conclusion

To reiterate, our underlying thesis is that Astrazeneca COAST data validates CD73 in a very meaningful way and Corvus should be a significant beneficiary.  Once a new onco-target is validated, there is typically a scramble for the competitors. In the last few years we have seen this pattern play out in CD47, TIGIT, Adenosine, ROR-1 and NK cells resulting in numerous acquisitions and licensing deals.  Inclusive of Angel Pharma’s value, Corvus trades at a negative $25M enterprise value, which makes little sense.   In addition to MUPA, CRVS controls an exciting pipeline being advanced by external partners including Angel in China and ISTs/non-profits in the US.  CEO Richard Miller has a track record of success and has the ability to advance the company and drug candidates.   We think CRVS is worth significantly more than the current market value of less than zero.

Catalyst

• Investor awareness that Astrazeneca's COAST data validated CD73, benefiting Corvus
• Mupadolimab clinical updates in 2022
• Initiating a pivotal trial in mupadolimab
• Additional big pharma deals in the adenosine space
• Monetization or IPOing of the Angel Pharma subsidiary in Hong Kong
• CPI-818 data