Corbus Pharmaceuticals' Sell-Off: Speculative Entry Price In Oncology And Obesity Therapies

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Corbus Pharmaceuticals still shows promise, with CRB-701 and CRB-601 advancing in clinical trials and CRB-913 targeting obesity with potentially fewer CNS side effects.Despite early-stage pipeline ...

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CRB-913's design aims to avoid these issues, enhancing its blockbuster potential.CRB-913, a CB1 inverse agonist for obesity, aims to reduce CNS side effects and presents potential for combination therapy with GLP-1 agonists.   aprott  Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP) has progressed its oncology and metabolic disorders IP. Since my April 2024 analysis, CRB-701 has presented promising results in Phase 1 clinical trials for solid tumors, and a second drug candidate, CRB-601, is also advancing with favorable outcomes. Additionally, I still believe CRB-913 has blockbuster potential. Unfortunately, other drugs in its class have had unfavorable safety profiles, which cast doubts on CRBP’s IP by extension. However, these concerns may be overblown, as CRB-913 explicitly aims to improve on its peers' CNS side effects. Moreover, I feel the recent sell-off might actually be a favorable entry price for new investors willing to bet on CRBP’s upcoming human clinical trials. Thus, I now think it’s fair to upgrade CRBP from a “Hold” to a speculative “Buy” for investors who understand its inherent uncertainty at this stage. Contrarian Opportunity: Business Overview Corbus Pharmaceuticals is a clinical-stage biopharmaceutical company developing drugs for precision oncology and metabolic disorders that target known biological pathways. Since my April 2024 analysis, the company has faced challenges due to its early-stage pipeline and limited resources. Nevertheless, CRBP’s pipeline has progressed since my previous article, particularly with its most advanced drug candidate, CRB-701. This drug targets Nectin-4-positive solid tumors.   Source: Corporate Presentation. November 2024. More recently, in June 2024, CRB-701’s Phase 1 study, sponsored by the Chinese CSPC Pharmaceuticals Group Limited, presented positive results. Patients previously treated or intolerant to standard therapies showed a favorable safety profile. The trial included 25 patients evaluated for efficacy with metastatic urothelial carcinoma [mUC] and cervical cancer. Early pharmacokinetic [PK] data indicated low free monomethyl auristatin E [MMAE] levels, the cytotoxic agent. This matters because it suggests reduced side effects while maintaining acceptable efficacy.   Source: Corporate Presentation. November 2024. Likewise, CRB-701’s overall response rate [ORR] (i.e., tumor size reduction) was 44% in mUC and 43% in cervical cancer at 1.2 mg/kg or higher doses. The disease control rate [DCR] was 78% in mUC and 86% in cervical cancer. These measures tell us the percentage of patients with a response or stable disease status. More importantly, it showed that most patients experienced a form of illness control. Furthermore, CRBP recently completed US and EU CRB-701 dose escalation trial enrollment. These are part of its ongoing Phase 1 trials, which evaluate four predetermined doses. We should get dose escalation data in Q1 2025. Furthermore, CRBP also progressed with CRB-601. This anti-integrin monoclonal antibody targets the TGF-β pathway in solid tumors. CRB-601’s Phase 1/2 trial started in October 2024 and should be finalized by December 2026. Currently, CRBP focuses on establishing CRB-601’s safety and treatment effects in combination with immunotherapy and immune-priming radiotherapy in patients who have undergone at least one line of therapy.   Source: Corporate Presentation. November 2024. Lastly, CRBP’s pipeline also includes a highly speculative but promising obesity treatment with CRB-913. This drug candidate is an oral cannabinoid receptor 1 [CB1] inverse agonist. CRBP plans on submitting an Investigational New Drug application [IND] by Q4 2024 for this IP, which is significant as obesity is a major market worldwide. It’s worth mentioning that CRB-913’s pre-clinical data with animal models has been actually quite promising, as presented at Obesity Week 2024. One of CRB-913’s main differentiating factors is its low brain penetration, which could potentially reduce central nervous system [CNS] side effects. This finding is noteworthy because it suggests that CRB-913 carries a lower risk of neurological side effects, making it a potentially viable treatment alternative. In preclinical mice studies, the drug displayed brain levels 15 times lower than monlunabant at the same dose, suggesting less accumulation in the brain than monlunabant. Moreover, the plasma-to-brain ratio for CRB-913 was 10 times higher than monlunabant and 50 times higher than rimonabant using the same dose. A high plasma-to-brain relation indicates that the drug remains mainly in the bloodstream rather than infiltrating the brain. So, I believe there is good preclinical evidence showing CRB-913 has a limited CNS penetration, instead focusing on peripheral action.   Source: Corporate Presentation. November 2024. Furthermore, it’s worth highlighting that CRB-913 doubled weight and fat loss compared with Semaglutide alone, so it’s also effective based on early data. However, its most important aspect is directly targeting overall weight and fat mass. In diet-induced obesity [DIO] mice previously treated with Semaglutide, CRB-913 showed that it can enhance weight loss effects synergistically. CRBP expects to dose its first human patient with CRB-913 in Q1 2025. It can’t be understated that this drug gives CRBP’s valuation substantial optionality because, if successful, it could be a blockbuster. Naturally, it’s still highly speculative, as its path to market is still long and uncertain. Neuropsychiatric Risks: CRB-913 Isn’t Monlunabant Additionally, CRB-913 is a key aspect to focus on when analyzing CRBP at this stage. On September 20, 2024, CRBP’s stock plunged by 60% after Novo Nordisk’s drug candidate Monlunabant reported disappointing trial results due to CNS side effects. Monlunabant Phase 2a outcomes showed dose-dependent neuropsychiatric influences, such as anxiety, irritability, and sleep disturbances. These mental health impacts could pose challenges to Monlunabant's viability.   Source: Corporate Presentation. November 2024. Consequently, CRBP’s stock declined because CRB-913 has a mechanism of action similar to Monlunabant. I imagine the market was concerned that CRB-913 could have comparable outcomes and limitations to Monlunabant. After all, these share the same MoA that suppresses the CB1 receptor to reduce appetite and fat accumulation. Moreover, CNS-related side effects also prompted Sanofi’s Rimonabant withdrawal. Like Monlunabant, Rimonabant was another CB1 inverse agonist. According to the FDA, Rimonabant, marketed as Acomplia, caused serious psychiatric side effects. Those side effects included depression and suicidal tendencies, and it was ultimately retired. Therefore, this might explain why CRBP’s CRB-913 likely fell out of favor with investors. However, CRBP explicitly tries to avoid these CNS issues by limiting to solely peripheral activity outside the brain itself. This means that CRB-913 mainly targets CB1 receptors in peripheral tissues like fat and liver, not the brain. Theoretically, this MoA should minimize CNS side effects and set it apart from Monlunabant and Rimonabant. In fact, the primary difference between Monlunabant and CRB-913 is peripheral restriction. Monlunabant doesn’t effectively avoid CNS penetration, which is what likely causes its undesirable neuropsychiatric side effects.   Source: Corporate Presentation. November 2024. In my view, CRB-913 has great potential by minimizing CNS exposure through structural chemical changes, reducing fat-solubility, increasing polarity, and using a larger molecule that is more hydrophilic. From first principles, I think these features may lead to effects localized outside the brain. However, this is just my take because CRB-913 still needs to prove this potential with human clinical trials. Until then, this means CRBP is inherently a highly speculative stock. Nevertheless, its valuation now seems much more compelling and might justify its risks. Market Overreaction: Valuation Analysis From a valuation perspective, CRBP now trades at a $223.1 million market cap, making it a microcap after the recent selloff. Its balance sheet now holds $19.4 million in cash and equivalents and $139.9 million in investments. Note that these investments are 74.2% in corporate debt securities. But, 87.7% of CRBP’s investments mature in one year or lease, so they’re mostly highly liquid. Thus, this amounts to $159.4 million in available liquidity against no financial debt other than regular operating liabilities. Its book value stands at $150.5 million, indicating a P/B of 1.5. For comparison, its sector’s median P/B is 2.4, so it already seems undervalued relative to its peers. Source: CRBP’s Q3 2024. 10-Q report. Unfortunately, CRBP isn’t forecasted to generate meaningful revenues in the near term, so using a P/S multiple isn’t viable. However, I estimate its latest nine-month cash burn reached $30.9 million by adding its CFOs and Net CAPEX. Annualizing this figure implies a yearly cash burn of $41.2 million, which suggests a cash runway of 3.9 years. This is actually quite healthy for most biotechs. Moreover, it’s perfectly reasonable to imagine that if CRBP progresses its IP into Phase 3 with robust data, it could still justify a higher valuation and mitigate potential dilution risks by then. In any case, I don’t anticipate that CRBP will require a major equity issuance in the near term to fund its research, which mitigates near-term dilution risks.   Source: Seeking Alpha. However, it’s also true that most of CRBP’s IP remains in quite early stages. In fact, its most advanced IP, CRB-701, remains in Phase 1 trials. Likewise, CRB-913, its obesity drug candidate, is also in the pre-clinical stages. So, CRBP’s funding should be enough to develop its IP into something more concrete. Yet, I doubt it’ll be enough to reach FDA approval unless it progresses rapidly with an FDA-accelerated designation or something similar. It’s also puzzling why the market essentially slashed CRBP’s valuation by roughly 60% after Novo Nordisk’s Monlunabant disappointing safety data. After all, CRB-913’s mechanism of action is precisely designed to avoid potential undesired CNS side effects. Moreover, Monlunabant has indeed proved that it’s effective, as it led to a 7.1 kg loss over 16 weeks. Still, I admit that Eli Lilly’s (LLY) Orforglipron does seem safe and effective by comparison, as it also reduces weight by 15%.   Source: Corporate Presentation. November 2024. Also, Orforglipron’s side effects were more manageable, such as nausea, vomiting, and diarrhea, unlike CNS-related risks like Monlunabant. So, as it stands, Orforglipron does seem to have a clear lead relative to Monlunabant, which is of the same drug class as CRB-913. Investment Caveats: Risk Analysis The main risk to consider with CRBP is that it largely hinges on two IPs. Even though I remain optimistic about both CRB-701 and CRB-913, it’s important to remember they’re still highly speculative in the early stages. I’ve seen multiple times where promising preclinical or Phase 1 data doesn’t hold up in more rigorous Phase 2 and 3 trials. The added risk layer is that CRBP’s data on CRB-913 isn’t even on humans yet. CRB-913’s data was just a DIO mouse model, showcasing it’s still speculative at this juncture. So, neither of these IPs has guaranteed odds of FDA approval. Source: Company's website. Moreover, we’ve already seen a major sell-off on CRBP because it will likely face stiff competition even if approved. This was evidenced by the 60% decline after Monlunabant's results. Plus, there are clearly some broader concerns around CB1 mechanisms, which may translate into stock price headwinds until CRBP provides more compelling trial data. Therefore, shareholders could see even further downside if either IP faces further regulatory setbacks or delays. Similarly, if competitors release trial data suggesting a higher efficacy or safety, the stock could continue trending much lower. Nevertheless, I still think CRB-913 can potentially deliver a similar or higher effectiveness as Monlunabant, but with a safer profile. In that case, expecting it to capture some market share wouldn't be unrealistic. After all, I wouldn’t rule out CRB-913 as a potential follow-up or maintenance option for patients who initially lose weight on GLP-1 agonists like Orforglipron or Semaglutide. CRB-913’s main advantage is that it can potentially help maintain weight loss without the constant need for incretin therapies.   Source: TradingView. Consequently, I feel the market might have overly associated Monlunabant with CRB-913 and may be underestimating its potential if its CNS side effects are indeed lower than CRBP believes it can achieve. I actually think the recent selloff could be a favorable entry price for new investors who understand that CRBP remains a highly speculative stock. But, at these levels, CRBP’s valuation and potential upside catalysts now nudge me towards a speculative “Buy” rating. Speculative “Buy”: Conclusion Overall, CRBP’s investment profile has changed materially since my previous article. It has continued progressing with CRB-701 and CRB-913. However, its valuation is now much lower. At the time, I leaned towards a “Hold” rating, as I felt its early-stage pipeline didn’t seem to justify its valuation. However, the current discount and CRB-913’s potential make much more sense. While I understand the concerns related to Monlunabant’s recent disappointing safety results, I also believe the market might be underestimating CRB-913’s explicit focus on avoiding CNS side effects. Also, CRB-913 appears to have promising effectiveness based on animal models. So, as long as CRBP proves that CRB-913 is safer than Monlunabant, it could still find a niche if successfully researched and commercialized. This ultimately nudges me towards a speculative “Buy” rating at these levels for investors who understand its inherent clinical trial risks.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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