Wino115 wrote: All the bullish caveats apply here, I’m just doing some thinking. To skip details just go down to conclusion below.
Yesterday JFM had an idle comment on what you’d value the cancer program at today. Since we have no Hard Facts on Humans (HFH) it’s hard for THTX. But here’s the framework Barclay’s uses and some of the Readout’s they are keying off as catalysts. Report from a year ago and the group of 14 companies are all SMID Cap oncology biotechs in 6 major approach verticals (Genetically targeted, Tyrosine Kinase Inhib, Tumor Escape Mechanisms, Cytokines, Cellular Therapies, Engineered Antibodies). I’m guessing THTX is in the last category, but unique from all the ones they have in there. I could be wrong.
- They use a Probability Adjusted Peak Sales number for each product and discount it back using a drug-by-drug Discounted Cash Flow model. The discount factor they use is primarily 12%, but for ones where the probability of their sales number is higher or sooner, they drop it to 9%. So discount for DCF is 12% or 9%.
- The Probability adjusted sales factor varies between 14% and 76%. Most are 25-55%. The higher risk 14% one (CytomX - antibody prodrugs, stock price 0% 12 mo) has had some toxicity issues with their approach, didn’t have clear indications and was awaiting clearer Phase 1 data at that time. The other really low one (Xencor, up 100% 12mo) also has lack of safety and MOA data. Both are clinical biotechs. The two with high sales probability weights over 70% (Karyopharm and Deciphera, both 0% 12mo) are commercial or just about to be. They think the approaches are de-risked or about to get FDA approval. What you’d think -the factors are: safety data, activity data to de-risk (HFH!), closeness to revenues. Other things they like are niche indications because they have rapid commercial uptake and clear approval routes.
- Kinds of readouts they mention as catalysts and examples of some of them.
- Positive pivotal data readouts
- Phase 1 readouts from “potentially disruptive medicines” . In one case they highlight an upcoming release where they will show what happened to 4 patients. Some are conference highlights of individual cases where the drug worked.
- Final FDA approvals
Some of the readouts they mention are:
-Favorable tolerability seems to be having less than 20% with adverse events or toxicity. They often just say they want to see “manageable tolerability”. Seems having a readout of very high tolerability would be an extremely attractive data point to hit and the bar is set really low here for THTX to crush in my view from seeing their neutropenia data. Then again, we have no HFH.
- This is a very heterogeneous group, but they generally are pleased with response rates (ORR) in the 15-50% range. Having your response rate rise over trials is also a positive readout feature they like.
- They talk about one company having a readout on their Phase 1 dose escalation study and that if it shows safety, stable disease and deeper response, it would be worth 20-30% to the stock price.
- If a trial adds a new indication that’s worth a lot to them and they look for that in readouts.
- Readouts for trials where it may show your drug is a lot better than the standard bearer for that indication. In one case they are looking for the top line readout and if it’s positive have a 50% price appreciation view for that news as it would supplant a Merck drug that's heaviliy used.
CONCLUSIONS:
It looks to me like all these companies have a lot of types of readouts of data — some is the classic top-line pivotal data and some is from pretty small trials and cases to display efficacy and safety, or review a few patient stories. So you do see that early in the development, this analyst team is at least willing to give some value, although heavily discounted. But he mentions these early readout as market-moving signals.
Having a probability weighted peak sales NPV approach isn’t that different from what was seen with the NASH analysts. It would still pay to get some US coverage. Also, since they do the DCF product by product for each indication, if you can show 2-4 indications off the bat that are in the “large river” areas of cancer therapy, I suspect you’d get pretty decent numbers even with Phase 1 data readout. Having all those shots on goal is very positive factor. Those data readouts seem pretty common, so I would hope THTX has ongoing releases as they learn about their medicines. The SMID cap guys down here seem to consider these things material or they want it out there for transparency and education.
Not knowing the kind of revenue numbers the SORT1 platform is going for yet (although likely large), I took a look at a company in their coverage that shows revenues from 4 indications progressively growing from 0 in 2020 to $163mil , $295, $512, $745, $1307bil over the next 5 years. I have no clue if that’s remotely close to what anyone would estimate for THTX and it’s way to early, but if you did have a progression like that, his model values it, using 12% discount and 56% probability of success, at $5.9billion today with his price target. His peak sales is $2.8bil in 2027. I know we’re a long, long way from that and I provide this purely as a framework to pull out later this year hopefully. But if there is eventually a view that TH1902 has a 60% probability of success and those would be the revenue numbers, that’s the kind of market cap you’d have as a target. The current market cap of that company (Iovance Biotherapeutics) is a bit over $6bil now.
Once again, just a look at a valuation framework, not what THTX has since we have no Hard Facts on Humans.