Biotech Ideas

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>>> Greenlighting Gamida Cell (GMDA) -


SeekingAlpha

Oct. 27, 2020

https://seekingalpha.com/article/4381817-greenlighting-gamida-cell


Summary

Gamida Cell recently executed a secondary at $4.50 a share on the back of positive Phase 3 clinical data for its lead asset.

The cell therapy biotech now trades at half its 2018 post IPO price despite a likely approval and launch of omidubicel in 2021.

The stock seems undervalued on a "sum of the parts" evaluation basis. A full investment analysis follows in the paragraphs below.

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The sad truth about humanity... is that people believe what they're told. Maybe not the first time, but by the hundredth time, the craziest of ideas just becomes a given.”? Neal Shusterman

Today, we take a look at an Israeli based biotech concern. The shares seem cheap on a "sum of the parts" evaluation. A full investment analysis and investment recommendation follows in the paragraphs below.

Company Overview:

Gamida Cell Ltd. (GMDA) Is a Jerusalem-based clinical stage cell therapy concern focused on the treatment of blood cancers and serious blood disorders. The company has two assets in the clinic undergoing evaluation for three indications. Gamida was formed in 1998 and went public in 2018, raising net proceeds of $47.5 million at $8 a share. The stock trades just over $5.50 a share and sports an approximate market cap of $280 million.

Nicotinamide Cell Expansion Platform:

Source: Company Presentation

The goal and challenge for makers of cell therapy treatments is to expand the number of donor cells while preserving the therapeutic functionality inherent in those original donor cells. Gamida’s nicotinamide (NAM) cell expansion platform leverages the biochemical properties of nicotinamide in combination with cell-growth promoting cytokines to reduce cell differentiation and preserve gene expression, thus increasing the efficacy of its donor-derived cell products. The company believes this approach can be applied to any cell type. To date, it has generated two clinical therapies.

Source: Company Presentation

Pipeline:

Omidubicel. Gamida’s lead candidate is omidubicel, a combination of NAM-expanded hematopoietic stem cells and differentiated immune cells that is being evaluated in patients in need of hematopoietic stem cell transplantation (HSCT) – a.k.a. bone marrow transplantation – for the treatment of high-risk hematologic malignancies. HSCT involves reconstituting a patient’s bone marrow by transferring hematopoietic cells from a healthy donor to patient following the administration of chemotherapy and/or radiation. It has been found to be curative for many malignancies. However, because it's difficult to find a donor – only 25%-30% have a match related donor – more than 40% in need of HSCT never receive one, thus the need for alternative stem cell sources.

Source: Company Presentation

Stem cells from umbilical cord blood are a viable option as they are readily available and do not require a full match for a successful transplant. However, a typical cord blood graft contains ~10% the number of stem and progenitor cells found in adult bone marrow. As such, engraftment of the donor cells and reconstitution of the patient’s immune system can be delayed, resulting in increased hospitalization and risk of contracting a life-threatening disease.

Source: Company Presentation

In a 125-patient Phase 3 study that was readout in May 2020, omidubicel significantly reduced time to neutrophil engraftment – the point when transplanted stem cells become established and begin producing healthy new cells. Gamida’s candidate demonstrated a median time to engraftment of 12.0 days (n=62) versus 22.0 days (n=63) for comparator (p<0.001). Overall, 96% of patients who were administered omidubicel achieved successful neutrophil engraftment vs. 88% in the comparator group. Additionally, on every efficacy and safety profile (e.g. probability of overall survival at year w and total infection risk) omidubicel graded out higher than partially matched or mismatched unrelated donor cells, haploidentical cells, and untreated umbilical cord blood. This news propelled shares of GMDA 37% higher by the close of the subsequent trading session (May 12, 2020), trading as high as $7.70 (intraday) before ending the day at $6.20.

Source: Company Presentation

The company disclosed encouraging data around secondary endpoints from the trial (including platelet engraftments, infections, and hospitalizations) earlier this month. A BLA submission also is on track for 4Q20 with a potential launch in 2H21. It has received Breakthrough Therapy and Orphan Drug designations from the FDA and an orphan designation from the EMA.

If approved, it would likely be the first graft source for bone marrow transplant. Gamida’s commercial target market will be relatively small with 70 transplant centers responsible for ~80% of the ~7,800 bone marrow transplants in the U.S. annually. Additionally, it can potentially reach the ~5,200 patients with its off-the-shelf therapy who are eligible but do not receive allogenic HSCT because they are unable to find a match. Coverage efforts are underway with positive payer conversations covering ~80 million lives to date. Piper Jaffrey analyst Edward Tenthoff estimates sales at $468 million in 2028.

Omidubicel also is being evaluated in a Phase 1/2 study for patients with severe aplastic anemia, a rare form of anemia where the body fails to produce sufficient red blood cells, white blood cells, and platelets. Additional data should be available before year end.

Other companies are employing HSCT for the treatment of a spectrum of diseases, including Magenta Therapeutics, which is in early stage trials for genetic diseases, autoimmune diseases, and blood cancers; Fate Therapeutics (FATE), which is conducting a Phase 2 study for its HSCT candidate Pro Tmnue in the prevention of graft versus host disease (GvHD) in addition to numerous trials for its pluripotent stem cells in the treatment of hematologic malignancies and solid tumors; and ExCellThera’s ECT-001, which can replicate exponentially in seven days for the treatment of blood cancers; amongst others.

GDA-201. Gamida’s other candidate was derived from its omidubicel learnings. GDA-201 is Gamida’s natural killer [NK] cell NAM-based immunotherapy that's being assessed in combination with antibodies in an investigator-sponsored Phase 1 study for the treatment of relapsed or refractory non-Hodgkin’s lymphoma (NHL) and multiple myeloma [MM]. NK cells have demonstrated great promise, but developers have faced several challenges including the ability to produce therapeutically functional copies in culture. The study – in which NHL patients also receive the antibody rituximab and MM patients are administered elotuzumab – has produced promising results in the NHL cohort to date. Of the 11 heavily pre-treated NHL patients, seven complete responses and one partial response were observed. These data compare favorably to responses observed in prior CAR-T therapy studies on lymphoma. Also encouraging was the absence of any dose limiting toxicities, GvHD, or neurotoxicity.

Gamida expects to complete development of an off-the-shelf cryopreserved formulation – the version being used in the investigator-sponsored trial is fresh, enhanced haploidentical product – and file an IND with the FDA in early 1H21 with an eye on initiating a Phase 1/2 trial in patients with lymphoma sometime in 2021. Down the road, management expects to combine it with multiple antibodies against a broad spectrum of cancers.

Balance Sheet and Analyst Commentary:

Having run low on cash since its IPO, Gamida leveraged the positive data on omidubicel to execute a secondary offering in May 2020, raising net proceeds of ~$64 million at $4.50 per share, bringing its cash position to $88.6 million on June 30, 2020, and providing a cash runway into 2H21.

Given the approval-worthy omidubicel Phase 3 data and encouraging Phase 1 results for GDA-201, it's not surprising to see the Street unanimously positive on Gamida’s future, five analyst firms including Oppenheimer and Needham have maintained or assigned Buy ratings on GMDA since June 30. Price targets proffered range from $13 to $20 a share.

Verdict:

With its Breakthrough and Orphan designations from the FDA and compelling Phase 3 safety and efficacy data, omidubicel is highly likely to be approved – short of some manufacturing or paperwork issue – in 2021. With one sales estimate approaching a half a billion dollars, a ~$280 million market cap seems light. The Street analysts agree as their median 12-month price target represents a valuation of nearly $800 million. Factor in the potential of GDA-201, not just for the treatment of NHL but other cancers when paired with other antibodies, and Gamida has plenty of upside.

With additional data from omidubicel and GDA-201 upcoming in 4Q20, a BLA filing of omidubicel in 4Q20, possible approval in 1H21, and launch in 2H21, there are plenty of catalysts on the horizon to propel Gamida. This would be an ideal covered call candidate except there are no options available against the equity at this time. Gamida also would have merited consideration for a significant holding, but Israel-based biotech firms always seem to trade at a discount to U.S. peers. Therefore, GMDA seems best as an attractive "watch item" position for now.

Is there any point in public debate in a society where hardly anyone has been taught how to think, while millions have been taught what to think?”? Peter Hitchens

Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum

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Disclosure: I am/we are long GMDA. 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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