We discussed the new plan for a phase IIb study in pancreatic cancer in a separate research note. It is worth mentioning there is also the potential for breakthrough therapy designation and an accelerated approval upon strong results in the phase IIb trial, though the FDA has recently updated its guidelines to fit those concerning dose optimisation, so it is not possible to judge how realistic this is right now. We do not assume this scenario in our valuation of Cantargia.

The Precision Promise trial was delayed because of FDA’s new focus on optimising doses (Project Optimus). Cantargia has tested doses of 1, 2.5, 5 and 7.5mg/kg in the CANFOUR trial (7.5mg was not tolerated), but the FDA wants to see controlled arms with two different doses. The advantages of the Precision Promise trial are that the control group is funded by the organisation (PanCAN) and the access to support from the organisation including from key opinion leaders. The disadvantages are the long time of the study with two parts of around two years each and the lack of focus on the IL1RAP-high and -low groups in the study design. So there are pros and cons for each choice. However, we believe the new phase IIb design will favour short- to mid-term investors as a full readout should be available in 2025 instead of 2027. If the results are strong, a partner will most likely take over the project from there.

The results presented at the AARC meeting in 2023 are a major achievement for nadunolimab, in our opinion. A subgroup of patients with high levels of IL1RAP demonstrated superior survival to those with low levels, even though high levels of IL1RAP historically have been an indicator of poor prognosis (in earlier lines of treatment). The median overall survival of the IL1RAP high group was 14.2 months while that of the low group was 10.6 months. The progression-free survival was 8.0 versus 5.8 months. Tumour shrinking (shown below) also strongly favoured the IL1RAP subgroup.

In our opinion, this amounts to a proof-of-concept of nadunolimab in IL1RAP-high patients. The results are statistically significant, which means it is highly unlikely they are due to chance. Cantargia compared the groups for bias but could find non based on several parameters. We believe the data strongly suggest nadunolimab has a meaningful clinical benefit for IL1RAP-high patients with PDAC (and potentially for IL1RAP-low as well). We believe the main risks when developing nadunolimab in pancreatic cancer are now regulatory, financial and commercial.

Cantargia is investigating biopsies from all other trials (around 250 patients have been enrolled in total) and will present more IL1RAP results in the future. The results in lung cancer will be important, though they might be challenging to interpret as IL1RAP is induced by platinum-based chemotherapies. We also expect new readouts from CIRIFOUR, CAPAFOUR and CESTAFOUR this year.

An application to start the first clinical trial of CAN10 was submitted after the end of Q1.  The phase I study should begin by the middle of this year. The first part will be a single ascending dose study with healthy volunteers. There will likely be seven dose groups with placebo with 4-6 patients in each group, perhaps more in the higher doses. In the second, multiple ascending dose part, patients with psoriasis will be recruited. Blood samples will also be taken to generate biomarkers. In total around 100 participants may be recruited, making this a rather large phase I study that will generate a substantial amount of data.

A similar antibody from Boehringer Ingelheim, spesolimab, was granted breakthrough therapy designation in early May.  It blocks the IL-36 receptor. CAN10 blocks the binding of IL-1, IL-33 and IL-36 to their receptors by binding to IL1RAP. Spesolimab prevented flares in patients with a type of psoriasis in a phase II study whose top-line results were published in January this year. The antibody already has a conditional marketing authorisation in Europe since late 2022. As the biological functioning of CAN10 should be similar, this suggests CAN10 could also reduce certain types of inflammation and supports its further development.

Operating costs in Q1 decreased to SEK78m compared to the SEK91m of the fourth quarter. The change in cash and cash equivalents was SEK-75m. The cash position was SEK353m as of the end of Q1. Management reiterated its guidance that it will last until mid-2024. The main costs going forward will be the three mid-sized clinical trials, the phase I with CAN10 and the two phase IIb trials with nadunolimab.

As the way forward in lung cancer will be redefined and no studies are currently recruiting, we remove the second-line indication in NSCLC from our valuation (pemetrexed carboplatin). For the time being, we include the combination with checkpoint inhibitors. We will likely have to re-evaluate the NSCLC potential of nadunolimab in the future.  We postpone the out-licensing of nadunolimab to 2025 (2024). We forecast a one-year later approval of nadunolimab in pancreatic cancer, in 2028 (2027) in combination with gemcitabine/nab-paclitaxel and in 2029 (2028) in combination with FOLFIRINOX. Due to the longer path to market, we reduce the likelihood of approval slightly to 41% (45%) in combination with gemcitabine/nab-paclitaxel. These changes lead to a reduction of our undiluted Base Case by around SEK5 to SEK24. As the cash position should last until mid-2024, we assume additional capital will be raised at some point (we estimate around SEK225m) before the an exit with nadunolimab. This leads to a fully diluted Base Case of SEK19 (NB, the dilution will be affected by the share price movement). Our Bull Case is SEK31 while our Bear Case is SEK9.