Corvus Pharma: Soquelitinib’s Big Stake in PTCL Therapy (NASDAQ:CRVS)

Introduction

Corvus Farmaceutica (NASDAQ:CRVS) is a clinical-stage biotechnology company advancing cancer therapies. Its lead asset, soquelitinib, is an ITK inhibitor being tested in peripheral T-cell lymphoma (PTCL). The company plans to initiate a Phase 3 trial of soquelitinib soon.

Here are some upcoming catalysts for the company:

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The following article focuses on soquelitinib for the treatment of PTCL.

The potential of soquelitinib in the PTCL treatment landscape

Soquelitinib (IND 2021) is a small molecule inhibitor of the interleukin-2-induced T-cell kinase (ITK). ITK is essential in signaling pathways that regulate T-cell activation, proliferation, and cytokine production. While other kinase inhibitors targeting BTK or JAK kinases are popular, ITK is still a relatively new area of ​​research and soquelitinib is one of the first to enter clinical trials. In PTCL, soquelitinib aims to differentiate itself from current therapies that target broader aspects of lymphoma cells or immune modulation. As the name suggests, PTCL is a result of T-cell proliferation and soquelitinib aims to suppress the growth of malignant T cells and promote a more robust anti-tumor immune response.

This is the current treatment landscape for PTCL:

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Corvus’ Phase 1 trial, conducted in China, focused on patients with relapsed or refractory PTCL who had received a median of three prior lines of therapy. This is a very sick population that has not yet responded to standard of care. Last December, Corvus presented new interim data, stratifying two different populations based on the eligibility criteria planned for their Phase 3 trial.

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With the focus on “eligible” patients, the response rates are encouraging and the durability is evident. The 2-year OS rate of 77% is impressive, especially in such a difficult-to-treat population. The company notes that 2-year OS data “includes all 36 enrolled patients.” Which begs the question: why show OS data from all 36 patients while presenting other data (e.g., ORR, DCR, etc.) from only 32 “eligible” and “ineligible” patients? Finally, the data support soquelitinib’s novel mechanism of action.

As with all phase 1 trials, there are some caveats. The complete lack of response in heavily pretreated patients highlights a potential limitation in the treatment of resistant forms of PTCL. We must also be aware of the small sample size (21 in the eligible group), which may limit the generalizability of the findings. Finally, PTCL is a very heterogeneous diseasemaking comparisons between studies with other treatments difficult without taking into account specific subtypes and patient selection criteria.

Corvus describes their Phase 3 study as follows:

The clinical trial is designed to recruit a total of 150 patients with relapsed PTCL who have received ≥ 1 prior therapy and ≤ 3 prior therapies. The number of prior therapies in this range selects immunocompetent patients. Patients will be randomized 1:1 to receive soquelitinib 200 mg twice daily or one of the standard chemotherapy regimens. The standard of care regimen is based on the physician’s choice of belinostat or pralatrexate. The primary endpoint is progression-free survival. Secondary endpoints include objective response rate, overall survival, and duration of response.

This is not an easy trial. Typically, oncology drugs in phase 3 have a 40% chance of progressing to an NDA/BLA. However, I would put the odds significantly lower for soquelitinib in PTCL. The complete lack of efficacy in heavily pretreated patients, as well as the relatively modest response rates in others, suggest that the success of soquelitinib may be determined by patient selection and disease biology. Competition with established therapies like belinostat adds another layer of complexity. It is also worth noting that the phase 1 data were collected in China. The Chinese population may have different genetic, environmental, and healthcare factors than Western populations (in fact, PTCL is uncommon in the US compared to other regions).

As for a discounted cash flow analysisI estimate 2,500 US patients (exact estimates vary by expert) and a price per treatment course of $252,000, which is about twice the price of pralatrexate (if soquelitinib proves superior in the phase 3 trial, it will likely justify a higher price). Here are some other assumptions:

The final calculation assumes linear growth in market share (0.6 market share * 1.0 penetration rate) until the peak sales year, consistent drug prices, specified probability of success, fixed COGS and operating expense percentages, and a defined discount rate to calculate the present value of future cash flows. The final risk-adjusted net present value ($152 million) is the sum of all discounted profits from the year of market entry to 2039.

Of course, there are many assumptions made in a DCF analysis for a phase 3 drug. In my analysis, there are some that are optimistic (e.g., 100% penetration, 60% market share after first-line treatments, price of $252,000) and some that may need to be adjusted (soquelitinib could potentially hit the market before 2028).

Let’s play with my model. What if phase 3 is successful? What’s the NPV of soquelitinib? It jumps to $760 million.

Financial health

As of June 30, Corvus reported $14.841 million in cash and cash equivalents. Marketable securities totaled $32.4 million. Total current assets were $48.258 million, while total current liabilities were only $13.335 million. Oddly enough, Corvus has no long-term obligations.

Also worth mentioning is Corvus’ overseas venture, Angel Pharmaceuticals.

Collectively, despite healthy balance sheets, the companies will need a significant amount of cash to test soquelitinib in Phase 3 (potentially more than $30 million based on AMA data), especially given the other companies.

Since Corvus does not record revenue, I estimate the cash runway based on the company’s own historical financials. In the first six months of 2024, Corvus used $10.638 million in operating activities. This implies a monthly money burning of approximately $1.77 million. If we divide their money and investments by this amount, it suggests that Corvus has been around for just over two years money trackHowever, as Corvus continues to develop soquelitinib in both PTCL and atopic dermatitis, investors should expect higher cash burn in the near future. The company’s forward-looking cash runway extends “into the fourth quarter of 2025.”

Remark: The cash runway and burn estimates are based on historical data and my analysis and should be considered estimates only. The term “cash burn” can encompass several factors beyond cash flow, making these estimates somewhat subjective. When companies include forward-looking estimates in their earnings reports, I will include them as a supplement to my analysis.

CRVS shares: risk/return analysis and investment recommendation

In summary, Corvus is a textbook example of a purely speculative biotech play. Soquelitinib for PTCL is certainly worth testing in Phase 3, but investors should temper their expectations for success. Corvus has prospects beyond PTCL. Atopic dermatitis is a chronic condition that requires long-term, safe, and tolerable treatments. Testing an ITK inhibitor makes sense, but whether it outperforms blockbusters like dupilumab remains to be seen. What about Corvus’ “adenosine receptor antagonist,” ciforadenant, which is in the same class as caffeinefor renal cell carcinoma? Again, it’s certainly not something I would bet my house on.

Corvus undoubtedly carries significant uncertainty and risk (both operationally and financially). CRVS could fit into a barbell portfolio strategy, but that’s not for me. I’ll rate it “delaybut it seems more like ‘wait to buy’.

Investing in microcap stocks like CRVS also carry a higher risk due to their limited liquidity, which can result in significant price volatility. Microcap stocks are also more susceptible to market manipulation and may have limited access to capital. Investors should limit their exposure to speculative stocks like CRVS. As always, maintaining a diversified portfolio limits the idiosyncratic risks that could one day lead to ruin.