Stellar Biotechnologies (SBOT: Nasdaq) 
By Maxim Group ($5.83, Feb. 23, 2016)

OBI Pharma announced that Stellar Biotechnologies’ Keyhole Limpet Hemocyanin-based immune therapy OBI-822/821 showed in a post-hoc analysis that a subgroup of patients that mounted immune responses had a highly significant improvement in progression-free survival and overall survival trending toward statistical significance.

The full data have not been released yet. Unfortunately the study did not meet the primary endpoint of progression-free survival (PFS).

 

Our takeaway is that the clinical benefit (and the impact of a Keyhole Limpet Hemocyanin (KLH)-based therapeutic) is significant enough to advance to a large global Phase 3 study in breast cancer. OBI Pharma [of Taiwan], a consumer of Stellar’s KLH, is now making plans for the next pivotal program.

Stellar (ticker: SBOT ) will continue to supply KLH to OBI Pharma and that supply should increase for what we expect will be a larger Phase 3 study. Our model has always assumed that the KLH-based breast-cancer vaccine from OBI Pharma would require additional studies (setting up a launch in 2020). We see the OBI Pharma news as a positive for Stellar and validating for KLH-based approaches in immune oncology.

[We rate Stellar at Buy with a 12-month target price of $17.]

Stellar is supplying KLH to multiple companies for the development of therapeutic vaccines (active immune therapy) for indications including breast cancer, ovarian cancer, lupus and Alzheimer’s disease. Thus, any one company’s success flows through to Stellar. For OBI Pharma’s lead therapeutic vaccine, OBI-822/821, in metastatic breast cancer study (N=349) patients that mounted immune responses showed significant clinical benefit in terms of improved PFS and are trending towards significant improvement in OS.

While the data did not achieve overall statistical significance, the positive data in patients mounting immune responses is validating for the KLH-based approach. OBI Pharma plans to use the data to design a larger Phase 3 study, meaning more KLH supply from Stellar. OBI-822/821 (”Globo H-KLH”) which was licensed from Memorial Sloan-Kettering Cancer Center ( MSKCC ), targets a tumor-associated carbohydrate (sugar) antigen (TACA) called Globo-H. Globo-H is over-expressed in a number of epithelial cancers, including breast, ovarian, prostate, gastric, lung and pancreatic. Globo-H is not immunogenic alone. Thus, driving an immune response is dependent on conjugation to Stellar’s KLH.

KLH-based therapeutic vaccines are emerging players in immune therapy (oncology and autoimmune). Biotech and pharma companies moving into the vaccine space are looking for a validated platform to deliver antigens, and KLH is often the answer. Stellar’s good manufacturing practices (GMP)-quality KLH may be the key that drives many companies’ therapeutic vaccines to commercialization. This gives Stellar a unique advantage, in our view, in that any company using Stellar KLH that drives a vaccine to commercialization by default needs Stellar as a KLH supplier.

What if that therapeutic vaccine is a blockbuster? It could drive substantial revenues ($20 million-$200 million per indication) based on larger KLH supply agreements, as well as potential royalties. In addition, as KLH-vaccines emerge in the immune therapy space, they will need to be produced at GMP-quality. Stellar has entered into a joint venture with Neovacs [of France] to bring together Stellar’s GMP-quality KLH and Neovacs’s therapeutic vaccine technology (Kinoids) to become the first third-party manufacturer of KLH vaccines that can support production at both clinical and commercial scale.

-- Jason McCarthy 
-- Jason Kolbert