Cytomx Therapeutics Inc. CEO Sean McCarthy told BioWorld that the longish hiatus between deals broken by the tie-up with Astellas Pharma Inc. was “very deliberate. Over that period of time, we were generating our first clinical data to get experience with how the technology works in cancer patients with our first two lead programs,” both of which have reached the phase II stage. A year ago in January, he said, the South San Francisco-based firm brought aboard Chief Business Officer Nick Galli to “hit the gas pedal a bit more in business development,” which led to the signing with Astellas, of Tokyo. Shares of Cytomx (NASDAQ:CTMX) closed March 24 at $6.53, up $1.60, or 32%.

The companies’ efforts will focus on T-cell engaging bispecific antibodies targeting CD3 and tumor cell surface antigens in cancer, with Astellas is paying $80 million up front. Preclinical, clinical and commercial milestone-related rewards could push the deal’s value beyond the $1.6 billion mark. Tiered royalties on global net sales are included as well, ranging from high single-digits to midteens. The arrangement will deploy Cytomx’s Probody bispecific technology, which designs therapeutics that stay inactive until spurred by proteases in the tumor microenvironment, so that they bind selectively to tumors and leave healthy tissue alone.

Cytomx “wanted to build on the series of deals we’ve done in the past,” Galli said, and craft an agreement in which “financial terms [would] recognize the increased validation of the Probody platform.” The upshot is a term sheet that allows Cytomx to “make that decision about whether or not we want to cost and risk-share later in clinical development,” at a point where “we have a nice picture of what the dataset and the activity of the molecule look like,” he said.

The Astellas deal involves four targets that may later be expanded to six; SEC paperwork provided more details. For a decided-upon number of targets, at a prespecified time prior to the start of the first pivotal study, Cytomx will have an option to elect to co-fund trials that are subsequently begun. If the firm opts in, it would be responsible for a predetermined portion of the costs, and would then have the option to co-commercialize in the U.S. For any such products, in lieu of royalties, Cytomx would receive less than 40% of the profits and tiered low double-digit to midteens percentage royalties. “We have [similar] elements in some of our previous deals, but in this deal we have more,” said Galli, who most recently served as vice president of business development at South San Francisco-based Denali Therapeutics Inc., where he led the execution of more than 20 collaborations.

Other Cytomx partners include Thousand Oaks, Calif.-based Amgen Inc., which signed up in October 2017, pledging $40 million up front and as much as $455 million in milestone-based rewards to access as many as four T-cell engaging bispecific antibodies. North Chicago-based Abbvie Inc. came aboard in April 2016. In May 2014, Bristol Myers Squibb Co. (BMS), of New York, paid $50 million for rights to use the Probody platform in the discovery and development of four immunotherapies for cancer, including one targeting CTLA4, the same receptor targeted by BMS’ approved melanoma drug, Yervoy (ipilimumab).

CEO McCarthy said preclinical work behind the BMS program is “really beautiful,” and cited “a little bit of communication out there that BMS, in the context in the Celgene transaction, has not been quite so committed to Cytomx, but it really couldn’t be further from the truth.” Earlier this year, BMS kicked off a randomized phase II cohort expansion in its ongoing first-in-human phase I/IIa trial of the anti-CTLA4 Probody BMS-986249 alone and in combination with BMS’ Opdivo (nivolumab). BMS-986249 is a peptide masked version of the anti-CTLA4 antibody Yervoy, and the cohort expansion is designed to further evaluate the safety and efficacy of the BMS-986249 combo in patients with metastatic melanoma, as part of the larger clinical trial. The move by BMS triggered a $10 million milestone payment to Cytomx. 

More ‘shots on goal’ ahead?

In the fourth quarter of last year, Cytomx started the PROCLAIM (Probody Clinical Assessment In Man) CX-072-002 phase II study evaluating the efficacy and tolerability of the anti-PD-L1 Probody CX-072, in combination with Yervoy in patients with relapsed or refractory melanoma. Stage 1 of the two-stage experiment will enroll up to 40 patients with initial data anticipated this year. The company also launched the PROCLAIM CX-2009 phase II expansion study of CX-2009 monotherapy (7 mg/kg, given every three weeks) in up to 40 patients with hormone receptor (ER, PR)-positive, HER2-negative breast cancer. CX-2009 is an anti-CD166 therapy.

Regarding Cytomx’s two lead assets, McCarthy said, “we may partner them down the road, but right now we maintain full ownership.” Early in the company’s history, Cytomx sought to strike a rough 50-50 balance between dilutive and nondilutive funding, he added. “It wasn’t an absolute rule that we were going to do it that way, it was just [the] concept” of a dial that could turn one way or another, as dictated by the cost of capital and talks with pharma. “This [Astellas] deal is a really great example of turning the dial toward nondilutive,” he said. “The timing is good, because the cost of capital in the equity markets for all of us in biotech has gone up substantially over the last few weeks. I think that dial is going to be turned more toward the nondilutive, for a while now, depending on what happens in the equity markets.”

For Astellas, the Cytomx deal continues building an immuno-oncology portfolio “with a particular interest in cell-mediated therapies” and antibody based mechanisms for turning cold tumors hot, McCarthy said. In late 2018, Astellas proceeded with an exclusive option to acquire Cambridge, Mass.-based Potenza Therapeutics Inc. under a warrant purchase agreement. Astellas paid an up-front fee of $164.6 million, with shareholders eligible for more payments that total as much as $240.1 million, depending on the progress of the various programs in clinical development. There’s a deal with Xencor Inc., of Monrovia, Calif., focused on bispecific antibodies. Another arrangement with San Diego-based Vical Inc. yielded disappointing phase III results with ASP-0113, a vaccine designed to prevent cytomegalovirus disease and associated complications in hematopoietic stem cell transplant recipients. The treatment in early 2018 failed to meet primary or secondary endpoints of the phase III study. It’s the second major stumble for the vaccine following a 2016 phase II miss in kidney transplant patients.

Wainwright analyst Robert Burns called the Astellas contract “incrementally positive” for Cytomx, noting in a report that the firm has been trading “at a negative enterprise value, with an operational runway into 2022 based on pro forma cash.” The latest tie-up again “demonstrates the degree to which Cytomx’s technology platform continues to attract interest from established pharmaceutical firms” and “should also reinforce confidence among investors that the Cytomx Probody approach remains capable of generating additional shots on goal,” in his view. He called the firm “a deep value opportunity in biotech” worth considering “even in the context of the challenging macro environment,” and reiterated his buy rating with a $14 12-month price target.