BioLineRx Ltd (BLRX)

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BioLineRx: Grows Oncology Pipeline With Addition Of Another Cancer Drug

https://seekingalpha.com/article/4058198-biolinerx-expands-cancer-pipeline-significantly-acquiring-novel-drug-candidate-ready-human?auth_param=3ofmh:1cdij7h:d81cb1e0b0aa5af32444716360a265ab&uprof=45#alt2

Mar. 27, 2017 2:03 PM ET|4 comments| About: BioLineRx Ltd. (BLRX), Includes: IDRA, MRK, NVS
Leny Hettmansperger

Summary

The company announced on March 23, 2017, the acquisition of UK-based private oncology company Agalimmune for $6M in cash and stock.

Agalimmune's lead drug candidate AGI-134 boosts the immune system, killing solid tumors beginning from the tumor where the drug is injected and all the other tumor resulting from metastasis.

The company now has a powerful one-two punch with potentially blockbuster drugs, BL-8040 and AGI-143, addressing a wide range of cancers from hematological to solid tumors.

BioLineRx ended 2016 with $36M in cash and no debt, which is sufficient to fund the company well into 2H 2018.

Four analysts have a consensus Buy on the stock with a $3.02/share average price target.

BioLineRx (BLRX) announced on March 23, 2017, the acquisition of Agalimmune Ltd., a private UK-based company with an innovative, anti-cancer immunotherapy platform. The announcement was made right before the release of the company's 4Q and FY 2016 financial results and corporate update. BioLineRx reported that it paid $6M upfront, with $3M in cash and the remainder in BLRX shares.

Although the company provided a lot of information on the acquisition in the press release, and continued the discussion in the conference call, the market did not seem to understand the move. The stock traded in a very narrow range, between $1.09 and $1.1, most of the day. This is a very strange behavior for BLRX's stock since it usually trades erratically, and mostly downward, following a financial release. It almost appeared as if investors were thinking "should I buy, should I sell?"

In summary, Agalimmune is said to have developed a novel immunotherapy solution to treat cancer. Rather than repeating what was said in the press release, and discussed in the conference call, I will give you my own interpretation about this opportunity after having done some research since the announcement. But, first, I will quote the vision of the key players in this deal, BioLineRx CEO Philip Serlin, and Damian Marron, Agalimmune's CEO.

BioLineRx CEO Serlin commented:

"Agalimmune's lead asset, AGI-134, harnesses naturally occurring, pre-existing antibodies to elicit a tumor-specific immune response that is unique to the treated individual and provides a universal, small-molecule approach to personalized immunotherapy. We are enthusiastic to incorporate into our pipeline this promising near-clinical asset, which substantially strengthens our position in the immuno-oncology space."

Agalimmune CEO Marron added:

"We are very excited that we found an ideal partner for our promising therapeutic pipeline. We are extremely impressed by BioLineRx's proven drug development capabilities, as well as their meaningful collaborations with global pharmaceutical companies."
Agalimmune's Oncology Technology Platform and Lead Drug AGI-134

My initial research on this subject (new to me until this weekend) led me to scientist Uri Galili, an immunologist who discovered the anti-Gal antibody in 1983 while working at Hadassah Hospital (Jerusalem, Israel). Anti-Gal is said to be the most abundant natural antibody in humans, constituting about 1% of immunoglobulins. Through the years, and with ever-expanding research into anti-Gal applications in several diseases, he developed Agalimmune's immunotherapeutic technology, and is currently its scientific advisor.

Below is a summary of Agalimmune's multi-pronged technology approach to eradicate solid tumors:

The drug is injected directly into a solid tumor.
The drug then triggers an immune response throughout the body that aims to destroy alpha-Gal-labeled cells.
A parallel action is that the drug transforms cold tumors into hot tumors.
The patient's immune system is then primed to respond to other tumors elsewhere in the body killing them.
This results in a personalized treatment because not all patients respond the same way to given treatments.
In layman's terms, Agalimmune's technology works by harnessing the body's own immune system to kill solid tumors. The drug is injected into a target tumor, and through a series of events, it kills the local tumor. Once debris from the killed tumor enters the blood stream, the body's immune system generates and programs T-cells, based on the chemical structure of the killed tumor, and attacks and kills all the other tumors that resulted through metastasis. This results in a personalized treatment, potentially leading to improved responses over other existing solid-tumor technologies. The mechanism of action of AGI-134 sounds similar to that of Idera's (IDRA) potential blockbuster drug candidate for solid tumors, IMO-2125, but using an entirely different approach.

Validation of Agalimmune's Technology Platform and AGI-134

On May 25, 2016, Agalimmune participated at the ASCO with a presentation entitled "AGI-134, a fully synthetic a-Gal-based cancer immunotherapy that shows synergy with an anti-PD-1 antibody and favourable pre-clinical pharmacokinetic and toxicity profiles."

In the press release announcing this presentation, Dr. Sascha Kristian, research director at Agalimmune, stated:

"This presentation highlights the strong potential of AGI-134 as a novel immunotherapy for solid tumours. The unique mechanism of action of AGI-134 addresses directly two key issues in cancer therapy. The first is inter and intra-patient tumour neoantigen heterogeneity. The second is the non-inflammatory, or cold, tumour microenvironment, that limits responsiveness to existing immunotherapies."

"Current immunotherapies alone lead to durable responses in less than half of patients and are associated with significant side effects. There is a huge need for therapies like AGI-134 that can increase the frequency and duration of responses. Furthermore, as a small molecule that can generate systemic T cell responses against the patient's own neoantigens in situ and with a potentially benign safety profile, AGI-134 may be an ideal candidate to use in combination with the first wave of immunotherapies - the checkpoint inhibitors."
Per information contained in Agalimmune's website, AGI-134 has successfully completed numerous pre-clinical studies. In these studies, AGI-134 demonstrated effective destruction of secondary tumors and provided robust protection against the formation of new tumors in a model of melanoma with a single dose only. The drug has also demonstrated a synergistic effect when combined with checkpoint inhibitors in additional pre-clinical studies. This is another reason BLRX's management is so bullish about the drug's prospects since it would offer the opportunity to improve the rate and duration of responses in multiple cancer types by working in conjunction with checkpoint inhibitors.

BioLineRx Breaks the Mold with Agalimmune Acquisition

A departure from the norm was the decision to acquire the entire company, rather than just in-licensing a promising drug candidate.

For those new to BioLineRx, the company now does have its own drug development technology platform like most biotechs do. The company's core competency is to identify, in-license, and develop promising drug candidates generated by Israel and global research organizations, universities, and small biotech start-ups. These drug candidates are put through a comprehensive screening process to ensure their technical and clinical feasibility as well as their commercial potential. Once identified, a team of experts in science and drug development, pharmacy and regulation, and IP work select the best candidates to advance them usually through at least a Phase 2 proof of concept in humans before seeking medium to large pharma.

This is the way lead drug candidate BL-8040 was obtained as announced on September 4, 2012, that it has signed an exclusive, worldwide license agreement with Biokine Therapeutics Ltd. for the development and commercialization of BL-8040.

Agalimmune's AGI-134 bypassed most of this process, and it's now ready for clinical trials in humans. CEO Serlin stated during the March 23, 2017, conference call, that they plan to begin AGI-134 clinical trials in patients with solid tumors in the first half of 2018.

Another reason for acquiring Agalimmune might be because it was developing other drug candidates, primarily in immunology, using the deep alpha-Gal knowledge of inventor/professor Galili in a host of diseases with unmet medical needs. This coincidentally is the area that largest shareholder and collaborator Novartis (NVS) is pursuing through its partnership with BioLineRx.

An analyst asked the question about the potential Novartis connection during the conference call, to which CEO Serlin responded:

"On a contractual basis, the agreement and the collaboration with Novartis is limited to Israeli sourced assets. Novartis can as well as any other company can look at and speak to us about other assets, but this Agalimmune asset AGI-134 plus the other assets that are in their pipeline are not related to the framework agreement with Novartis."
It is obvious to me, and it might be for others, that BioLineRx paid very little for Agalimmune, judging by the significant value and upside that AGI-134 and Agalimmune's other assets bring to the table.

There could be two key reasons for it:

Agalimmune's CEO Marron sees great potential synergy resulting from joining forces with BioLineRx to maximize the value of the AGI-134 asset, as well as others in development.
CEO Marron probably realizes that he obtained BLRX shares cheap at little over $1, and expects their value to increase significantly in the future.
I am certain that Mr. Marron knows and appreciates the value of working with BioLineRx because it has close working relationship with Merck (MRK), Genentech, and Novartis. My first article on BioLineRx discusses in detail the clinical trials being performed using the company's current lead cancer drug candidate, BL-8040, in conjunction with checkpoint inhibitors from Merck (KEYTRUDA) and Genentech (TECENTRIQ) in multiple cancer indications.

BioLineRx Will Present AGI-134 at AARC on April 2, 2017

BioLineRx is not waiting time letting the oncology world know about AGI-134. The company announced on March 27, 2017, that it will feature AGI-134 at the upcoming American Association for Cancer Research Annual Meeting, to be held in Washington DC from April 1 to April 15, 2017.

The announcement stated that an abstract titled: "The novel a-Gal-based immunotherapy AGI-134 invokes CD8+ T cell-mediated immunity by driving tumor cell destruction, phagocytosis and tumor-associated antigen cross-presentation via multiple antibody-mediated effector functions," was accepted for a poster presentation on April 2nd, 2017.

Key 4Q and FY 2016 Results

At December 31, 2016, the company had $36 million cash. This was better than the $34-35M I estimated in my latest article on the company. This was the key figure that I was interested in since it validates the steady $3-4M cash burn per quarter. This cash is enough to fund current programs well into 2018, per CEO Serlin's comments during the conference call.

The company also announced that it is discontinuing the development of its product for treating celiac disease to focus on two major cancer therapies, BL-8040 and the new AGI-134. The remaining products are in the pre-clinical trial stage, most of them part of a collaboration with Novartis as seen in the following pipeline slide shown at an investor presentation prior to the Agalimmune acquisition:



Updated Milestone and Catalyst Table

Now shown in the table below are upcoming presentations at AACR on April 1 and at ASCO on June 2, 2017, and new Agalimmune drug candidates:

Date in 2017

Milestone/Catalyst

Drug Candidate/Collaborator

Condition

1Q 2017 (Done)

Interim results Phase 2 Stem-cell Mobilization (Allogeneic)

BL-8040/Washington University School of Medicine

Hematology Oncology

Mid-2017

Planned Phase 1b study in maintenance AML

BL-8040/TECENTRIQ (Genentech)

Leukemia

2H 2017

Interim results Phase 2a

BL-8040/KEYTRUDA (Merck)

Pancreatic Cancer

2H 2017

Planned start Phase2b Stem-cell Mobilization (autologous)

BL-8040/Washington University School of Medicine

Hematology Oncology

2H 2017

Planned start Phase 1

BL-8040/TECENTRIQ (Genentech)

Pancreatic Cancer

2H 2017

Planned start Phase 1

BL-8040/TECENTRIQ (Genentech)

Gastric Cancer

2H 2017

Planned start Phase 1

BL-8040/TECENTRIQ (Genentech)

Non-small Cell Lung Cancer

Undetermined

Preclinical Studies

BL-1210/Novartis

Nonalcoholic Steatohepatitis

Undetermined

Preclinical Studies

BL-1220/Novartis

Various Liver Failure Diseases

Undetermined

Preclinical Studies

BL-1230/Novartis

Dry Eye Syndrome

Undetermined

Phase 1/2

BL-7010

Celiac Disease

Undetermined

Preclinical Studies

BL-9020/JHL Biotech

Type 1 Diabetes

Risks and Uncertainties

As with any biotech in the clinical development stage, there are several potential risks that should be considered:

Failure of clinical trials.
Large collaborators opting out of current agreements for several reasons like restructuring, buyout, disappointing clinical results, etc.
Having difficulty incorporating the new acquired company Agalimmune.
Collaborator exit could cause and increase cash burn that would cause the company to seek equity financing, thus diluting shareholders.
Loss of key talent to the competition.
Acts of terrorism, war, or natural disasters.

Conclusions

I probably sound like a broken record when I state that BioLineRx is deeply undervalued in every one of my articles on this company. BioLineRx has rich partnerships with large pharma, a strong and expanding pipeline, a potentially blockbuster oncology drug candidate, BL-8040, and now it added a potential game changer in AGI-134. And it did it with a very modest expenditure of only $3M in cash, with the rest being $3M in stock.

CEO Serlin stated during the March 23, 2017, conference call that AGI-134 is ready for clinical development, and they plan to begin trials in patients with solid tumors in the first half of 2018. I expect trials to begin using AGI-134 as a monotherapy, followed by trials in conjunction with checkpoint inhibitors. But it is likely that these trials could be performed in parallel, as it is the case with BL-8040, once the concept is proven. Big oncology players like Merck and Genentech have shown an appetite to try their checkpoint inhibitors with numerous drug candidates that work on the tumor micro-environment like BL-8040 and AGI-134 do.

BioLineRX announced on March 27, 2017, that it will feature AGI-134 at the upcoming American Association for Cancer Research Annual Meeting, to be held in Washington DC from April 1 to April 15, 2017. On April 2, 2017, the company will present an abstract titled "The novel a-Gal-based immunotherapy AGI-134 invokes CD8+ T cell-mediated immunity by driving tumor cell destruction, phagocytosis and tumor-associated antigen cross-presentation via multiple antibody-mediated effector functions."

The company has a solid balance sheet having ended 2016 with $36M in cash and no debt. This means that it is funded at least into 2H 2018. Therefore, there shouldn't be fears of near-term equity offerings that are so damaging to small biotech valuations. Just to reiterate how undervalued BLRX's shares currently are, the company's market cap is only about $30M above cash on hand.

I believe the market will take notice this time, and the share price will begin reflecting the current analyst $3.02 average price target. The highest PT is $7/share. The most recent recommendations were given as a "Buy" with a $3/share PT by Rodman & Renshaw on February 13, 2017, and on February 15, 2017, by H.C. Wainwright.

Investors interested in BLRX shares are encouraged to evaluate all the risks and uncertainties found in the most current 10-Q and 10-K filings with the SEC.

Disclosure: I am/we are long BLRX.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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