HTBX: 1Q:21 Results

By John Vandermosten, CFA

NASDAQ:HTBX

READ THE FULL HTBX RESEARCH REPORT

First Quarter 2021 Results

Heat Biologics, Inc. HTBX reported first quarter 2021 results on May 5, 2021, concurrent with the submission of Form 10-Q to the SEC.

Highlights for the first quarter ending March 31, 2021 and to-date include:

➢ Appointment of William Ostrander as CFO - January 2021

➢ Commencement of manufacturing process for ZVX-60 - January 2021

➢ Publication of additional preclinical COVID-19 vaccine results - January 2021

➢ Positive interim survival data from HS-110 Phase II NSCLC trial - February 2021

➢ Preclinical data on PTX-35 demonstrating delayed tumor progression - April 2021

➢ Appointment of Anthony Manning, Ph.D. as Chief Scientific Advisor – May 2021

In the financial sphere, Heat generated $0.5 million in grant revenue versus $0.9 million in the same quarter last year, and posted a loss attributable to common shareholders of ($7.5) million or ($0.31) per share compared to a loss of ($6.3) million or ($0.77) per share for the prior year period. Grant revenue was sourced from both CPRIT and NIH grants versus only CPRIT in 1Q:20. Grant revenue is decreasing as deliverables are completed under the current phase of contracts.

For the first quarter ending March 31, 2021 and versus the first quarter ending March 31, 2020:

➢ Research & development expenses totaled $3.4 million, up 22% from $2.8 million due to initiation of HS-110 Phase II trial, COVID-19, and other programs, offset partially by decreases in expenses related to HS-130 and PTX-35;

➢ General & administrative expenses rose 45% to $4.8 million from $3.3 million, driven primarily by an increase in stock compensation expense of $1.9 million;

➢ Net loss was ($7.5) million, or ($0.31) per basic and diluted share, compared to ($6.3) million, or ($0.77) per basic and diluted share;

As of March 31, 2021, cash, equivalents and short-term investments on the balance sheet totaled $132 million, compared to $26.4 million twelve months prior. The increase was driven primarily by a $119.3 million contribution from financing during 2020. Cash burn for the quarter totaled approximately $5.21 million versus approximately $5.81 million in the prior year period.

PTX-35

In early June 2020, Heat announced that the FDA had cleared its investigational new drug application (IND) for PTX-35 followed shortly after by the initiation of the first clinical site for the trial and the appointment of Anthony Tolcher, MD as lead investigator. By the end of June, the first patient had been treated in the Phase I trial. Up to 30 patients are expected to be enrolled with advanced solid tumors refractory to standard of care.

As a reminder, PTX-35 is being developed by 85% owned subsidiary, Pelican Therapeutics, and we allocate royalties accordingly. There is also a relatively complex royalty arrangement with Cancer Prevention and Research Institute of Texas (CPRIT), in return for the $15.2 million total in support that includes a repayment of 4x the original grant and a 0.5% royalty in perpetuity. There are a number of milestones owed to Pelican by Heat that we also reflect in our valuation.

Preclinical Data on PTX-35 Demonstrating Delayed Tumor Progression

Heat presented a poster¹ at the American Association for Cancer Research Annual Meeting 2021 featuring data from PTX-35 in a murine melanoma model. The study aimed to characterize mouse PTX-35 (mPTX-35) on tumor growth, Treg functionality and stability. Tregs, or regulatory T cells, are a type of T cell that modulate the immune system. Because of their immunosuppressive abilities, Tregs are of interest in cancer biology, where tumors escape immunity. Tregs that express CTLA-4 and CD25 are responsible for suppressive activity, and neuropilin-1 (NRP1), a co-receptor protein, is highly expressed on Treg cells implicit in cancer immune evasion. Furthermore, Tregs can vary as can their effector responses. C57BL/6 mice² were inoculated with melanoma cells expressing ovalbumin and then were administered fluorescently-labeled, ovalbumin-specific CD8+ T cells. The mice were then administered mPTX-35, mHS-110 and anti-PD-1 inhibitor, in varying combinations. For the second dose 14 days later, the mice were administered a second dose of mPTX-35 and mHS-110. Samples were then taken from the peripheral blood, spleen and tumor microenvironment, analyzed for CD4+ regulatory T cells and effector Th1 and Th17 cells.

Results showed that combination mPTX-35, mHS-110 and anti-PD-1 inhibitor was able to suppress tumor growth. Analysis of Tregs in the tumor and spleen revealed that there was an increase in percentage of Foxp3+ Tregs, an indicator of reduction in Treg suppression, in the arms administered mPTX-35 that were absent in other arms. Furthermore, functional Treg markers were reduced with mPTX-35 and mHS-110, with or without anti-PD-1 as measured by NRP1, CTLA-4 in the tumor and CD25 in the spleen. Regarding effector cells, mPTX-35 in the presence of mHS-110, with or without anti-PD-1 inhibitor resulted in increased propensity to convert unstable Tregs into Th17 cells. Finally, measures for IFNγ-producing Th1 cells and IL17-producing Th17 cells, which play an important antitumor role, were increased in mPTX-35 treated arms with or without mHS-110.

COVID-19 Program

Heat's wholly-owned subsidiary, Zolovax, has been focused on developing medicines and vaccines for infectious diseases using the glycoprotein platform, gp96. Previous research has been conducted for simian immunodeficiency virus, malaria and Zika. In March 2020, Heat entered into a research agreement with the University of Miami (UM) to sponsor new research and development of a SARS-CoV-2 (COVID-19) vaccine.

Preclinical COVID-19 vaccine results were published in the journal Frontiers in Immunology in late January 2021. The publication highlighted additional data sets around memory T cells and built on previously reported data. The new information demonstrated polyfunctional, antiviral cytokine releasing CD8+ and CD4+ T cell memory responses specific to the SARS-CoV-2 spike protein, specifically in the lungs and spleen of immunized animals at 30 days post vaccination. In the lungs of mice, memory CD8+ T cell response was observed 60 days post vaccination, indicating a durable immune response attributed to lung tissue-resident memory T cells that are required for clearing viral infections of the lungs.

Heat has made the case for using its approach, if ultimately approved, along with other vaccines to improve resistance to COVID-19. Many other vaccines that are being developed for the virus stimulate an antibody response and, if used in conjunction with Heat's gp96 approach, would add T cell immunity to improve protection.

Positive Interim Data for Phase II HS-110 in NSCLC

Heat announced positive interim survival data for its Phase II trial of HS-110 (viagenpumatucel-L) in combination with leading checkpoint blockade inhibitors (CBIs). The trial was not a comparator trial; however, similarities in design with past trials enable comparison of competitors' performance with HS-110.

Heat is investigating HS-110 in non-small cell lung cancer (NSCLC) and is currently conducting a Phase II trial. The Phase II DURGA trial (NCT02439450) features two treatment settings, as first line maintenance and second line or greater therapy. Additional information is expected to be provided later this year on the setting that will be pursued in Phase III trials. NSCLC considerations include first line, second line and salvage therapy among others.

The treatment setting in first line maintenance is divided into two arms, HS-110 and pembrolizumab (KEYTRUDA) with and without pemetrexed (ALIMTA), a chemotherapy agent. The second arm features HS-110 and nivolumab (Opdivo). Pembrolizumab and nivolumab are monoclonal antibodies targeting programmed death receptor-1 (PD-1) and are known as checkpoint inhibitors. Checkpoint inhibitors interfere with the ability of tumor cells to defy immune response, allowing the body to attack the tumors. Finally, the cohorts within the nivolumab arm, cohorts A and B, evaluate the combination of HS-110 and nivolumab in both checkpoint inhibitor naïve and checkpoint inhibitor progressor subjects. The study is intended as proof of concept in a defined patient population. Enrollment has completed with 122 patients.

Data for HS-110 was selected for presentation at the 2021 ASCO meeting to be held June 4 – 8. Roger B. Cohen, MD, will be presenting the poster entitled Interim results of viagenpumatucel-L (HS-110) plus nivolumab in previously treated patients (pts) with advanced non-small cell lung cancer (NSCLC) in two treatment settings.

Appointment of William L. Ostrander to Chief Financial Officer

Heat promoted William Ostrander to the position of Chief Financial Officer, effective January 4, 2021. Mr. Ostrander joined Heat in September 2019 as Vice President of Finance bringing two decades of experience to the role. Ostrander held leadership positions at Liquidia Technologies, serving as Director of Finance & Controller then Executive Director of Finance between 2014 and 2019, at KBI Biopharma for seven years as Senior Director, Finance & Accounting, and at LexisNexis, Seisint, and Boca Research in Finance and Accounting roles.

Pipeline

Corporate Milestones

➢ William Ostrander appointed CFO - January 2021

➢ Various coronavirus vaccine milestones – 2021

◦ Began manufacturing process for ZVX-60 - January 2021

◦ Investigational New Drug (IND) Application

◦ Phase I launch

➢ Positive interim survival data from HS-110 Ph2 NSCLC - February 2021

➢ Discussion with potential partners – ongoing

➢ Complete HS-130 Phase I trial – 1H:21

➢ Complete PTX-35 Phase I trial – 1H:21

➢ End of Phase II meeting for HS-110 – 1H:21

➢ Data readout at ASCO for HS-110 – June 2021

➢ Data readout on Phase I HS-130 – 2H:21

➢ Data readout on Phase I PTX-35 – 2H:21

➢ Additional detail regarding Phase III target NSCLC settings for HS-110 – 2H:21

Summary

Heat Biologics expects to provide readouts in 2021 for HS-110, HS-130 and PTX-35. Additional detail on how HS-110 will progress into the clinic is also expected and we hope to see which setting will be pursued in lung cancer later this year. Year to date, Heat has continued to raise capital with proceeds from a common stock offering adding $26 million to the balance sheet that should sustain operations for the next several years.

Heat Biologics' interim data from the DURGA trial reflect results from a combination approach of HS-110 with checkpoint inhibitors. The results compare favorably to historical data reflecting CBIs alone. This is an early confirmation of the opportunity for Heat's gp96/CTA technology. The interim data show HS-110's potential as a second line or later therapy, in conjunction with an anti-PD-1, in either CBI naïve or progressor patients. Based on this interim data, it appears that HS-110 and nivolumab could be superior to CBIs or chemotherapy alone. As Heat completes the Phase II trial, we look forward to topline and final analysis from the study, which is expected to be presented at ASCO. Heat management is in the process of arranging an End-of-Phase II meeting with the FDA where trial design and appropriate setting for the anticipated Phase III will be a primary point of discussion. Management is also in talks with key opinion leaders (KOLs) regarding the optimal regulatory path to pursue for the candidate. HS-110 may be pursued as a frontline treatment for NSCLC or as second line in checkpoint inhibitor-progressed patients.

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1. Kalim KW et al. PTX-35, a Potential First-in-class Agonist, Reduced the Suppressive Activity of Regulatory T cells and Enhanced CD4+ T cell Effector Responses in the Presence of Tumor Antigens in a Murine Melanoma Model. April 15, 2021. American Association for Cancer Research 2021

2. C57BL/6 is a common laboratory mouse model used to evaluate medicines against human disease, especially cancer.

3. Kalim KW et al. PTX-35, a Potential First-in-class Agonist, Reduced the Suppressive Activity of Regulatory T cells and Enhanced CD4+ T cell Effector Responses in the Presence of Tumor Antigens in a Murine Melanoma Model. April 15, 2021. American Association for Cancer Research 2021

4. HS-110: Heat Biologics, Inc. (HTBX)

5. Source: Heat Biologics March 2021 Corporate Presentation.