Can Replimune Infect Cancer? Key P2 Data Readout Tomorrow AM

Updated: Jan 7



Summary: Replimune (NASDAQ: REPL) is developing a next-generation oncolytic immunotherapy platform. Their lead candidate, RP1, is an engineered herpes simplex virus designed to both selectively infect and destroy tumor cells and maximize a patient’s own immune response to the tumor cells. The latter function could potentially turn “on” tumors that the immune system was previously ignoring. REPL will be providing a data update from the P2 portion of their ongoing P1/2 trial for RP1 + Opdivo tomorrow pre-market (8 AM EST). The update will consist of readouts for the melanoma and non-melanoma skin cancer cohorts. We are excited about this readout given the positive P1 data previously reported in November 2019 and the substantial market opportunity for RP1 in their lead indications. We believe REPL has the potential to go on a significant run over the next 12-months driven by multiple near-term clinical milestones.


Key Takeaways

  • REPL has extensive oncolytic development experience: The team was previously at BioVex, which led the development of the first FDA-approved oncolytic therapy (Imlygic) and was purchased by Amgen for $1B in 2011 ($425M upfront). While Imlygic has not lived up to commercial expectations, we are excited about the preliminary data we have seen for RP1 and the combination regimen and biomarker-driven approach REPL is taking.

  • Positive P1 data provides proof of concept for RP1: REPL reported positive P1 data last November for RP1 alone and in combination with Opdivo. In the monotherapy arm, tumor destruction was observed following RP1 administration, indicating RP1’s independent antitumor activity. REPL also reported that 3/4 patients with PD-1-refractory cutaneous melanoma were respondents, suggesting RP1 may benefit patients who fail to respond to current best therapies. Moreover, 4/5 cutaneous squamous cell carcinoma (CSCC) patients responded to the RP1 + Opdivo combination, supporting the efficacy of the combination regimen. Interestingly, RP1 administration was associated with increased PD-L1 and CD8 T cells in the tumor tissue: this suggests RP1 successfully enhanced T cell tumor penetration and could potentially turn tumors “on” for checkpoint inhibitor therapies (like Opdivo), leading to synergistic efficacy. These combinations with checkpoint inhibitors hold a lot of mutual promise, as borne out by the support BMS and REGN are providing furnished REPL for the combination studies with Opdivo and Libtayo, respectively.

  • Multiple near-term readouts in 2020 expected: An update for the RP1 + Opdivo melanoma and non-melanoma skin cancer cohorts is scheduled for tomorrow, while data in the bladder cancer and MSI-H cohorts is expected 4Q20. We also expect updates for the potentially registrational P2 RP1 + Libtayo in CSCC in 2021.

  • We foresee substantial upside for REPL over the next year (25 - 100%), and are setting our target price at $27, representing 35% upside over our entry price of $20: We are excited about the data released to date and anticipate further positive news tomorrow, which we believe will set REPL up for further growth over the next 12 months. We have seen reported peak sales forecasts for RP1 in the range of $1.7B. We believe that would be an optimistic forecast, with our back-of-the-envelope analysis indicating peak sales potential in the $1.1B range. There is substantial growth potential at the current price (market cap of ~$730M). Our rapid analysis of REPL is supported by other analyst coverage, with 12-month consensus price targets in the mid-20s to low-30’s range, representing meaningful upside over the current ~$20 price. We believe that positive data tomorrow has the potential to drive the price to the ~$27 range.

  • Additional value in RP2 and RP3, highly engineered follow-on assets: While early stage, we are excited to see REPL continue to innovate and arm their oncolytic therapy candidates with further functionality designed to enhance immune response to targeted tumor cells.


Disclosure:

We own shares of Replimune Group. This article expresses our own opinions, not Replimune Group’s or any other party’s opinion. We are not receiving compensation for this report. We do not have a business relationship with the company mentioned in this report.


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