Nkarta: Down 50% Since March With A Clinical Catalyst Ahead

seekingalpha04-27

NKTX is now down over 50% from its March 2024 highs.The company's pipeline includes NKX019, a CAR-NK cell therapy with potential in cancer and autoimmune disease.NKTX has already produced some data ...

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The work in autoimmune disease is just getting underway in H1'24.   Gilnature/iStock via Getty Images Nkarta Inc's (NASDAQ:NKTX) stock has pulled back over 50% from the highs of early March 2024. The name might find support in the $6 range looking at the chart, but to see if there might be some news flow to help that out, it's important to look at the company's pipeline of modified NK cells and upcoming catalysts. Data by YCharts NKTX's pipeline At the top of NKTX's pipeline is NKX019, an allogeneic (off the shelf) chimeric antigen receptor-NK cell, or CAR-NK, targeting CD-19 expressing cells (B-cells). NKX-019 also expresses a membrane bound form of interleukin-15 (IL-15) which aids the activity and persistence of the cell therapy without having to use exogenous cytokines which can have their own side effects. NKTX pipeline. (NKTX Corporate Presentation, March 2024.)   NKX019 in refractory lupus nephritis The use of cell therapies for autoimmune disease, particularly B-cell mediated autoimmune disease, has become a popular area of research, and right now an could even be considered crowded. The idea is that if you can wipe out the autoantibody producing B-cells, the patient's immune system can recover, this time without the disease causing cells, and the patient could experience a long-term, drug-free remission. Consideration of the mechanism of action of CD-19 targeted cell therapy in autoimmune disease including systemic lupus erythematosus. (NKTX Corporate Presentation, March 2024.) NKTX is running a study of NKX019 in lupus nephritis in up to 12 patients. One of the positives is that NKTX will be testing a lymphodepletion regime using just cyclophosphamide. Rationale of a cyclophosphamide only lymphodepletion regime in lupus and dosing protocol. (NKTX Corporate Presentation, March 2024.) While this work is exciting, NKTX is only getting underway dosing the first patient in H1'24, and so for now we don't know what the data will look like in these patients. Further, I expect NKTX to report data from its work with NKX019 in oncology mid-year, so the autoimmune data isn't the near-term catalyst. NKX019 in r/r-NHL As for NKTX's work in relapsed/refractory non-Hodgkin lymphoma (r/r NHL), there has been some data already. Notably 7 out of 10 patients achieved a complete response, in phase 1 dose escalation work, at the doses of 1B or 1.5B cells (to be clear that would be 3 x 1B cells or 3 x 1.5B cells per 28 day cycle). The 300M cell dose produced a less impressive CR rate of 25% (1/4 patients) according to a December 2022 update (slide 13). NKX019 dosing protocol and initial data in r/r NHL. (NKTX Corporate Presentation, March 2024.) Some would say however, that the dose response relationship seen there is encouraging. In any case, NKTX also tried retreating patients with progression and found that produced a 100% CR rate (4/4 patients). While this initial work with NKX019 in NHL was in CAR-T naïve patients, subsequent work, which focuses on the subset of patients with large B-cell lymphoma (LBCL), includes NKX019 use in patients who have previously tried CAR-T cell therapy. There is also a newer compressed dosing schedule where the three infusions of CAR-NK cells are given in one week rather than two. Overview of NKX019 NHL trial amendments. (NKTX Corporate Presentation, March 2024.) An update in mid-2024 is a major near-term catalyst for NKTX and I think the company has a chance of reporting something promising given the number of amendments the company has included. There is a chance that one of these changes provides for additional differentiation, relative to existing cell therapies for NHL/LBCL from other companies, based on what was seen so far. The company's prioritization of autoimmune disease however, may have some wondering if the NKX019 oncology work is about to be deprioritized. For example, check out the last slide from NKTX's corporate presentation in March 2024. Summary slide from NKTX corporate presentation. (NKTX Corporate Presentation, March 2024.) Since further investment in NKX019 is gated based on the data from the next update with NKX019 in oncology, and that update is planned for mid-2024, I wouldn't be surprised to see NKTX deprioritize the oncology work, if NKX019 doesn't perform in LBCL. NKX101: Deprioritized but lessons learned NKTX has gained plenty of experience experimenting with different lymphodepletion regimes prior to CAR-NK cell infusion. For example, with its NKX101 studies in acute myeloid leukemia (AML), the company tried lymphodepletion using fludarabine/cyclophosphamide (Flu/Cy) but also fludarabine/ara-c (Flu/Ara-c). Initial data with the Flu/Cy regime with NKX101 in AML patients was reported in April 2022. That data produced an initial 60% CR rate (slide 19) in a subset of five patients treated with 1B or more NK cells. Subsequent dosing at this level however with the Flu/Cy regime saw the CR/CRi (complete response with residual thrombocytopenia) rate drop to 22%, in the 2023 update (slide 11). At the time of the June 2023 update while the data with NKX101 using the Flu/Cy regime for lymphodepletion had softened from 60% to 22%, there was new data from patients treated with the alternative Flu/Ara-C regime. The Flu/Ara-c regime seemed to produce a superior CR/CRi rate of 67%, albeit from six patients. Use of NKX101 in AML with a Flu/Ara-C lymphodepletion regime. Note data from June 2023. Subsequent update from March 2024 discussed below. (June 27, 2023, NKTX Presentation.) Still it is worth noting the Flu/Ara-c regime yielded a 50% rate of grade 3+ sepsis. The same high rate of sepsis wasn't seen with Flu/Cy lymphodepletion, where the rate of grade 3+ infections was just 10% (slide 9). It wasn't a clear win then, for the Flu/Ara-c regime in my mind as some might not like that toxicity profile. Overview of safety data from Flu/Ara-C with NKX101 in AML patients. (June 27, 2023, NKTX presentation.) The efficacy data with NKX101 using the Flu/Ara-C regime seems to have softened with a subsequent update however. NKTX's Q4'23 earnings in March came with the statement that the CR/CRi rate had dropped to 25%.  Nkarta announced today that it has closed patient enrollment in its clinical trial of NKX101 and deprioritized the program as part of a pipeline realignment that directs primary resources to its lead pipeline program, NKX019, for the treatment of autoimmune disease. This follows a recent review of preliminary safety and response data from patients with r/r AML that received NKX101 after LD comprising fludarabine and cytarabine (flu/Ara-C). The aggregate CR/CRi rate (5 of 20 patients) was lower than what had been observed in the first 6 patients in the cohort. Comments from NKTX with Q4'23 earnings, March 21, 2024.  Nonetheless, the work with NKX101 provides an example of NKTX's attempts to optimize lymphodepletion regimes, and the lessons learned can increase the odds of success in other indications too. It also shows that there are always risks initially strong data can soften with subsequent updates. Financial Overview NKTX finished 2023 with $250.9M in cash, cash equivalents and investments, which includes $2.7M in restricted cash. On March 25, 2024, NKTX announced it was pricing an offering of ~21M shares at $10 per share, and ~3M pre-funded warrants to raise gross proceeds of approximately $240.1M. Assuming proceeds of ~$230M would bring cash to ~$480.9M. R&D expenses were $23.3M in Q4'23 and G&A expenses were $7.9M in the same quarter. NKTX reported a net loss of $117.5M in 2023 and net cash used in operating activities was $86.2M. At the 2023 rate of burn then, NKTX would have cash for over five years. According to a recent DEF 14A filing, there were 70,467,620 shares of NKTX's common stock outstanding as of April 14, 2024, and 3M prefunded warrants outstanding. NKTX has a market cap of $493.3M ($7 per share). Conclusions, rating and risks I think the data seen so far with NKX019 in NHL is promising, and updates focused on patients with LBCL could be positive in some respects too. NKTX is testing several protocol amendments, providing multiple shots on goal. If compressed dosing results in a higher CR rate, that would be an obvious positive. Further if patients who tried CAR-T but now need further treatment respond to NKTX's NKX019, then that would be an obvious positive too. I can see also that NKTX could deprioritize the program if it doesn't feel the data are strong enough to pursue, especially in the context of deciding to focus funds on autoimmune disease. I rate NKTX a buy currently, because it is only trading at cash and has years of cash runway. I think the data with NKX019 show initial signals of promise and the retreatment data are particularly positive. Retreatment is all the more feasible with an off the shelf product too. I think the mid-year update will come with at least one area for future work with NKX019 in oncology, even if it is only in CAR-T refractory patients. The risks of a long in NKTX are several fold, a few of which I'll discuss here. Firstly if the upcoming NKX019 data in LBCL lead to the company deprioritizing the program, the market would probably see it as written off and the stock could fall. Secondly, if the upcoming NKX019 data in LBCL are not viewed as positive by the market, but NKTX, flush with cash, decides it has the funds to pursue development, the stock could fall.  Lastly, delays in enrolling patients or providing updates from the lupus nephritis trial of NKX019 could lead to a sell off. As mentioned there are many other cell therapy developers in the area, and so delays mean competitors will move ahead, reporting data first.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.5","shortVersion":"4.22.5","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2430745706"}