My Investment Premise:
1. Validated Drug Vicineum with Successful Trial Results and Near Complete CMC/BLA; FDA Approval Likely
a. Urologist direct administration of Vicinium will drive U.S. adoption as the standard of care for bladder cancer, initially as a second-line treatment (after re-occurrence, failure of other treatments). Direct treatment by the urologist is efficient for the healthcare system, convenient for the patient, and for the urologist, provides the ability to provide higher quality, continuous care while capturing more economic value in their practice.
b. Bladder cancer is tough to treat and tends to return. Current treatments are neither curative/permanent, nor effective for all patients, so an incrementally better drug/alternate tool should be approved. Also, patients are often faced with a “Sophie’s choice“ after failing existing approved treatments – surgery/bladder removal when frail and not likely to recover OR death. This is what I encountered at the end of the patient journey that I took with my father-in-law, who passed from bladder cancer. He was too frail to elect radical cystectomy to completely remove his bladder after 10 years of bladder cancer treatment and had no alternative. He passed in 2016. Vicineum has demonstrated efficacy with a good safety profile and patients deserve access to this life-saving treatment.
c. Further, Sesen has early indications that its drug candidates have other uses (solid tumors, head & neck, etc.).
2. Current $180 million Market Cap ~ equal to $170 million Cash On-Hand
a. Balance Sheet/Cash of $170 million on hand as of 3/31/2022 ~ approximately $0.85 per share (similar to book equity value of about $0.87 per share) both per FASTgraphs/FUNgraphs is a rounding error away from being equal to the closing share price of $0.906 on July 14, 2022, which is a market-cap of $180 million.
3. Attractive Risk-Reward Set-Up - share price ascribes ~zero value to…
a. Vicineum for bladder cancer treatment in the U.S.
b. Vicineum for bladder cancer treatment in Europe
c. Vicineum licensed to Qilu for Greater China: milestone payments and royalties after the imminent conclusion of the trial they are conducting in China
d. Vicineum bladder cancer treatment for the rest of the world
e. Potential for treatment of solid tumors, head & neck, etc.
f. Cash flows from a legacy product: an exclusive license agreement with Roche for legacy Interleukin-6 (IL-6) antagonist antibody technology owned by Sesen Bio. Following a $20 million milestone payment received in January 2022, Sesen Bio has cumulatively received $50 million in upfront and milestone payments, with an additional $220 million in potential future milestone payments, as well as royalty payment obligations on future sales, remaining under the Roche License Agreement. As part of the Roche License Agreement, Roche also maintains the right to fully acquire the IL-6 technology.
Ascribe your own upside for these items and quantify/risk adjust them if you see it this way as you see fit. There will be cash use should SESN continue to independently pursue commercialization and it may take some time to realize this value. A lump-sum transaction with Roche for the legacy product or strategic alternatives (licensing, partnering, sale) with respect to Vicineum for bladder cancer or other indications could provide a step-change realization of some of this value quickly. Clarifying uncertainty or capturing value from a strategic partner for even one of these value streams could easily cause a step-change favorable impact on the share price.
Sincerely, an investor with long-only positions in SESN continuously since 2018 that significantly increased my investment in 2022.
