Topline Summary
Theseus Pharmaceuticals (NASDAQ:THRX) is a developmental biotech that recently experienced losses of over 70% on the news that they would be discontinuing their lead program, a novel KIT inhibitor for the management of gastrointestinal stromal tumor (GIST). This leaves them with a market cap that’s half of their current assets, but they also have no products in clinical development. Is there anything worth salvaging here?
Pipeline Overview
THE-349
In their latest business guidance, THRX disclosed that they would be discontinuing their next-generation KIT inhibitor THE-630 in favor of developing a fourth-generation EGFR inhibitor for the treatment of EGFR-mutated non-small cell lung cancer (NSCLC).
This inhibitor is THE-349, which the company will soon show some data on at the AACR-NCI-EORTC meeting. According to them, THE-349 can target all known resistance mechanisms and has penetration into the central nervous system. This could help to address several challenges in EGFR-mutant disease, including brain metastases and development of resistance.
How bad are these challenges? The current first-line standard of care for EGFR is osimertinib, which does have some CNS activity, and osimertinib was originally developed to handle the T790M gatekeeper mutation, which was the most feared driver in the era where all we had was erlotinib, gefitinib, and afatinib.
Today, the more feared resistance drivers tend to be things like amplification of the MET gene, or transformation to small cell lung cancer. These circumvent the inhibition of EGFR altogether.
There’s also some recent news to chew on. Press released data from the MARIPOSA study showed that the combination of amivantamab and lazertinib beat osimertinib in terms of PFS. So we may end up with an even more complex landscape of therapies for EGFR-mutant NSCLC soon.
Still THRX has guided that they will be submitting an IND to begin phase 1 trials for THE-349 in late 2023.
Discovery Pipeline
THRX is also working on a few other kinase inhibitors. One is a next-generation drug for CML, with the hope of driving more treatment options that are effective against the T315I gatekeeper mutation. Currently, one drug, ponatinib, has activity against this mutation, and its use has been plagued over the years by risk of thromboembolic events.
The other discovery project is another KIT inhibitor, built from what the company has learned from its former lead program.
We might be able to expect more about these drugs as early as 1H 2024.
Financial Overview
At the end of Q2 2023, THRX held $47.5 million in cash and equivalents, with another $160.7 million in marketable securities. Total current assets stood at $213.8 million.
Meanwhile, the company incurred operational expenses of $17.6 million, and after interest income, THRX realized a net loss of $14.8 million. At this cash burn rate, the company has around 14 quarters of funds to continue operations. The company states that this is enough cash to sustain them until 2026.
Strengths and Risks
At this time, THRX is rather de-risked from a cash perspective, and I wouldn’t be too surprised if it trims up its costs a bit in the next quarter, given that it has stopped development of its most advanced product candidate.
But with the news of the termination of THE-630, THRX is, for now, back to being a preclinical biotech, which means that even 2026 may not be enough time to get them to meaningful results, assuming they ever come. “Next-generation” EGFR and KIT inhibitors have faced a lot of challenges over the years. I’m reminded of the failure of rociletinib for EGFR-mutant NSCLC being terminated back in 2016 despite huge excitement.
More recently, ripretinib, a next-generation KIT inhibitor, failed to improve outcomes for patients with GIST in earlier lines of therapy. The third-generation BCR/ABL inhibitor ponatinib ran into toxicity issues that have long stalled its widespread use in CML.
When you couple that with the MARIPOSA news I mentioned above… treatment for this disease just looks a lot different now than when people were getting really excited for next-generation TKIs. As our understanding is advancing for these diseases, it feels less and less like “more agents targeting the same targets in the same way” is the answer. I can and have been proven wrong in the past, of course, but that is the vibe I have about these projects right now for as long as we know next to nothing about them.
The long story short: advancing new generations of targeted therapy is not simple, as THRX has already demonstrated. I would be wary of even good signals of activity, given the history of these fields, since randomized trials that really move the needle are so rare. And we won’t see these signals for years yet.
Bottom-Line Summary
THRX is sailing a sturdy ship into very treacherous waters. And I’m afraid that journey is not for me. The best mid-term prospect we can expect is that they get some drugs together that end up in late-line therapy and continue to need validation and more validation in order to capture market share from standard agents. Ask Deciphera how easy that is to accomplish.
This one is not for me right now. Maybe down the line if they can show something really interesting, but this is not the ground floor I’d want to be on.
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