The All-Everything INSPIRE Interim Review – No Illusions!

I/we are long Onconova Therapeutics (ONTX)

November 17, 2017 – Always do your own due diligence and consult a professional financial advisor before making any investment decision.

No sane person retains a long position in a developmental biotechnology company that is less than two months away from running out of cash. And yet, even after several articles and videos attesting to this fact, many investors seem perilously unaware that this is the predicament we find ourselves in with Onconova. I can attribute this to my limited self-published exposure and the casual investor’s limited due diligence.  It doesn’t help at all that the issue, unsurprisingly, wasn’t addressed directly in the Q&A session that followed the Q3 Conference Call by sell-side analysts covering ONTX.

Once a thriving enterprise with a deep pocketed partner, Onconova is now the ugly duckling of the developmental space with all of its pipeline eggs riding precariously in a shaky interim review basket. With a market-cap of less than $20m and a phase-3 trial not funded anywhere near to completion, this DSMB futility analysis now represents the biggest binary event in recent biotech history. Utilizing five hypothetical press release headlines to capture the five distinct possible outcomes, we’ll examine the effects that these will have on the company and, more importantly, on the share price. But before we do, a brief word about the most recent public offering.

920k New Shares Will Flood The Market Weekly

It has long been stated that equity raises are a necessary evil in the realm of biotechnology investment. That “necessary evil” today is accentuated by excessive executive remuneration and a Wall Street banking system replete with blood sucking greed merchants who work in coordination with each other to line their already bursting pant pockets. A stunning example of this would be Synergy Pharmaceuticals (SGYP) recent equity raise that was a tethered prelude to a loan facility requirement hidden from public view.

That noted, Onconova’s recent stock offering of 920k shares at $1.50 each, though dilutive by discount, hardly constitutes anything that could be characterized as evil or even draconian. Depressing – yes. Evil – no. The paltry proceeds of just over $1m will likely see them through to the interim analysis of INSPIRE and no further. The biggest drawback will be on the upward price movement of the stock as daily over the next several weeks the lion’s share will be sold back into the market for a profit of between 5 and 50%. It’s easy, therefore, to see how wealth begets wealth on Wall Street.

So, why not do a more aggressive warrant laden raise with interest bearing preferred shares that could have seen them through to the conclusive data readout in middle to late 2018? Perhaps, only God and CEO Ramesh Kumar know this for sure but that’s the first question I’m going to try to answer in this article. So, from the least to the most likely scenario we have these three.

  • The equity lenders didn’t see a future beyond this coming interim review that warranted a larger sum of money or a greater corporate involvement (see headlines 1 and 2 below).
  • CEO Ramesh Kumar has thoroughly rebuffed these back alley bankers in order to protect the value of his and our shares.
  • Kumar sees a positive interim review triggering a non-dilutive, income generating event the size and nature of which remains known only to him (see headlines 4 and 5 below).

A Myriad Of Ways To Look At This Offering

It’s clear that Ramesh Kumar seeks to arrive at the interim analysis of INSPIRE with his company fully intact and uncompromised by the vulture capitalists of Wall Street’s underbelly. No one can convince me that he wasn’t given the opportunity to raise ten to twenty million dollars in a creatively structured offering that would have decimated the value of our holdings. By doing so, he could have made it past a futility boundary breach intact. As it is, such an event would likely result in the end of Onconova as we now know it. Kumar, therefore, is either confident of what he has or is rolling the dice like the rest of us are.

For Claity’s Sake – Let’s Play The Hypothetical Headline Game

INSPIRE is not a prototypical phase-3 trial. The structure is far more similar to that of a phase-2 endeavor – open label and unblinded. It’s also adaptive after an interim review the parameters of which have only recently been agreed upon by the FDA and European Medicines Agency. The fact that both regulatory bodies are working closely with the company on all aspects of this trial attests to not only the need for new leukemia therapies but that, additionally, these agencies find therapeutic value in rigosertib. I don’t believe that most casual investors understand any of this. In fact, I think they’re all about to get a heavy dose of due-diligence-neglected when the interim review turns out positive. That stated, the declining share price worries me in that the network of clinical trial physicians is not encumbered by absolute silence. Mitigating these concerns is the multi-country, worldwide stage that this study has been set upon. Therefore, we trudge bravely into the night unaware of the dangers though others might be.

What the casual investor is privy to, however, is that Onconova’s previous big pharma partner, Baxter, bailed after the ON-TIME prelude failed. What they can’t seem to appreciate is that the runway to a return on such a large investment was extended beyond that which BAX could afford to bear. These kinds of pragmatic decisions are made all the time by retail investors but if big pharma pulls the plug it’s assumed the value proposition has altogether vanished. And let’s not forget the graveyard that blood cancers are to promising compounds nor the act of desperation that data mining often is when companies are trying to remain relevant. Is it any surprise then that so many investors have long since pushed onto warmer climes? I think not.

Regardless, and, in fact, because of this, the value proposition here is enormous on both sides of the risk/reward ledger. To illustrate this let’s utilize an analytical tool I just now invented called; The Hypothetical Headline Game. We’ll start with the one press release that no long wants to wakeup to and that every long dreads. We’ll also assign a share price to each event and a strategy. As a reminder, these are products of my tormented imagination only.

Headline #1: “The DSMB Has Stopped Onconova’s Pivotal INSPIRE Trial For Futility”

Of course, that’s not how the actual headline would read because biotech companies always spin to the positive. Instead, you’d likely see something about rigosertib’s substantial treatment effect that failed to reach statistical significance. Unfortunately, the end result would be the same – an intraday sell off that would result in a sub-$5m market-cap accompanied by an inability to raise sufficient capital to fund the pipeline moving forward.

If you don’t think this could happen, think again! There’s lots that we don’t know about the so-called “high-risk” patients from other historical MDS trials that would substantially sharpen our perspective in this one.  I’d be tempted to say that big pharma has access to such data as do large investment funds all of whom have now steered clear of involvement in ONTX but the genetic testing used to identify the ITT population in this study is a relatively new development.  Consequently, fear of the unknown seems to be the factor driving most of the trading paralysis.  Additionally, the incredibly high bar to hurdle for the primary endpoint of overall survival – 37% is dissuading as well.

Stock Price: $0.50 to Zero – Strategy: Stay Away From Sharp Objects

Headline #2: “As Recommended By The DSMB Onconova Will Increase The Size Of The INSPIRE Trial”

This usually indicates that a study is under-powered to successfully achieve its primary endpoint. And because this would be off putting to partnering interest, leaving the company in need of further capital, the overall effect would be a negative on par with an outright crossing of the futility boundary. A smack of reality would likely follow a smattering of hope.

Stock Price: $1 to Zero – Strategy: Stay Away From Loaded Guns

Headline #3: “The INSPIRE Trial Will Advance With Only The Very High Risk Patient Population”

This is the second “shot on goal” that CEO Ramesh Kumar has often referred to in public presentations. What percentage of MDS patients who have failed hypomethylating agents fall into this category I’m not sure but CEO Kumar would undoubtedly be telling us at every opportunity he was given. More importantly, success here would provide Onconova with a foot in the door to commercialization of rigosertib.  If the U.S. market opportunity for second line treatment was between three and five hundred million dollars annually, then that would, at the very least, be cut in half. Whether an ex-U.S. partner would step forward with anything substantial, again, I’m not sure. But the market would likely rally behind Kumar’s narrative.  Interestingly, according to Kumar, the intent to treat population of INSPIRE appears to be weighted toward this group already.  From the Q3 Conference Call we have this remark.

And our prediction was that compared to the previous trial, the new trial which is designed for higher risk patients, the very high risk group would be larger. And I can tell you that that’s exactly what we are finding out that in the new ITT population, the very high risk group continues to be the majority of the patients, a significant majority of the patients.

Unfortunately, a price crushing equity raise chock full of warrants and preferred shares would likely follow.  Interestingly, the company published a supplemental prospectus to this most recent offering detailing an exercise of 3.29m warrants with a weighted average exercise price of $5.10 per share which can be found on page 18.  Though diluting our existing shares by nearly a third, the company would access $16m in badly needed cash.  This might curtail the need for the blood letting I would expect should my $4 target price come true.  In any event, a necessary evil would surely follow in the wake of this news.

Stock Price: $1-$4 – Strategy: Possibly Sell at $4

Headline #4: “Onconova’s Pivotal Phase-3 INSPIRE Trial Will Continue As Planned”

This is the headline every ONTX shareholder would greet with more than a ho-hum sense of relief. It would be validation of both the trial and my investment thesis.  However, I believe that this would presage an even bigger event taking the form of a commercial and developmental partnership that would be announced within days of the news release. Any agreement has to be attractive to both parties and Onconova needs only a small upfront payment of $30m to remain relevant through the INSPIRE data readout in late 2018. That’s an attractive amount to a big pharma entity with a strong oncology sales force (think Celgene). Onconova could be equally demure where sales royalties and milestones were concerned in exchange for full funding of the frontline combination study featuring oral rigosertib in conjunction with Vidaza (azacitidine).

As good as this would be it is nowhere near as good as it gets.  The result, however, would be a soaring share price followed by a standard public offering that we all could live with.

Stock Price: $6-$18 – Strategy: Hold or Sell at the Top

Headline #5: “INSPIRE Is Stopped Early For Success”

This is the extremely unlikely, though not unheard of, catalyst that is almost always followed by news that the trial’s control arm has been moved to treatment with the successful agent, in this case, rigosertib. The stock of said company moves in multiples and not by percentages. What kind of exponential gain are we talking about here? Well, that’s both easy and difficult to explain.

Easy, because the readily accessed patient population represents a potential U.S. market of an honest $300m conservatively and can be addressed by a small sales staff as cancer centers are common domains of cancer treatment. U.S. and European approval would be a foregone conclusion as the company has worked closely with both regulatory bodies and there are no other approved second line treatments.

The terms of that partnership I addressed earlier would be sweetened on both the front and back ends of the agreement with contingencies relative to frontline approval. All of this would spur the market to reappraise the value of Onconova’s pipeline assets and future prospects.

Difficult, because putting a dollar amount to all of this would be hard to do without appearing overly exuberant. Regardless, my conservative guess would be an immediate jump to the mid-30’s followed by a steady climb past $50 per share.  Note that $30 a share would represent a market-cap of only $421.83m a figure I find woefully short of a fair value mark.  Consequently, I believe it would take the market sometime to catch up to the new reality of ONTX.

Stock Price: $35-$50 – Strategy: Buy a Boat

In Conclusion

All signs point to failure.  The market is not enthusiastic about our chances.  That early halt I referenced above is likely a pipe dream born out of a growing sense of desperation surrounding an equity in decline. That noted, every dream realized is in some way founded upon the same shifting foundation.  And those who stand strong must be prepared for whatever comes.  By reading this with comprehension, it is my hope that you’re less likely to slip unexpectedly and that you wobble a bit more gracefully.

Always be well…

Thaumaturgical Disclaimer

As a practicing person of magic and aspiring warm-hearted wizard, I’ve utilized tarot cards as a basis for sub-analysis of biotech equities for the past three years and in my personal life for nearly four decades.

Mental Illness Disclaimer

I’ve been diagnosed as suffering from manic depression. Therefore, my reactions to events can sometimes be more pronounced than the facts warrant. I owe investors complete transparency and am the only ideator in biotech to provide that. Please focus on the ideas presented and don’t hesitate to contact me with any factual errors found in the article text.

General Disclaimer

Any information or opinion expressed herein may not be true, accurate or correct and it does not constitute a suggestion to buy, sell, hold or adopt any investment strategy for this stock or any stock that may be mentioned. Reliance upon information in this article is at the sole discretion of the reader. The sole purpose of my article is to entertain by providing an opinion and information the accuracy of which is as good as the public sources it was derived from. For example, KOL’s often utilize exaggerative terminolgy to describe a product or asset they are promoting on behalf of a biotechnology company they’re associated with. Do not act on anything I have written, a CEO has spoken of, or a sell side analyst has stated. Rather, do your own due diligence and consult a professional investment advisor before making any investment decision. Acting on what any one writer has imparted to you is foolish at best. I have no better access to resources than you do. I sometimes make mistakes. And there are a myriad of things, which can happen in lieu of any forward-looking statement I have made. Any stock featured or mentioned in an article I compose is subject to all manner of influences, which can change its value in dramatic fashion both higher and lower. These events can be of a wide variety – news related; managerial decisions; trial failures; stock manipulations; and so on. I make every effort to declare positions I have in stocks I cover or mention in an article but reserve the right to move in and out of said investments at my own discretion based upon the wisdom of doing so. I implore you to do your own due diligence and invest at your own considerable risk attaining the just reward your efforts have wrought. Additionally, if you are aware of any misstatements of fact contained in this or any article I have written, you are encouraged to email me immediately at the link given in the header above or address them in the comments section

CYCC And ONTX: Intertwined By Destiny

I/we are long CYCC and ONTX.

The spirit of wickedness in high places is now so powerful and so many headed in its incarnations there seems nothing more to do personally than to refuse to worship any of the hydras heads. The world seems little better than a new Tower of Babel – all noise and confusion.

1969 J. R. R. Tolkien

It’s been very difficult for me over the past several years to have steered close friends toward investment in German biotech, Pieris Pharmaceuticals (PIRS) while refraining to mention my clandestine love for the two step-children of developmental oncology – Onconova Therapeutics (ONTX) and Cyclacel Pharmaceuticals (CYCC).  You see, I believed then, as I do now, that Pieris is the safer bet to appreciate over time.  But safety comes at a price.  And since I’ve never been a big fan of turtle racing, preferring faster paced adventures, I’m betting on the two unattractive step-sisters of failed Phase-3 endeavors instead.  That now stated, Onconova and Cyclacel have much more in common than the high-minded reproval of sector elites relative to their Phase-3 flops.

Both Company’s Lead Drug Candidates Still Have Life

You wouldn’t know it by observing Onconova’s paltry market-cap of $26m but rigosertib is in yet another and far more promising Phase-3 study entitled; INSPIRE.  More promising because it is structured upon culled data from 116 of the 299 patients in the ONTIME study that fell nicely into a category labeled “high risk” and responded brilliantly to rigosertib therapy administered intravenously.  Had this population of patients been the focus of a large Phase-2 trial with an over all survival benefit of 7.9 mos. vs. 4.3 mos. in control (p = 0.0008) the market-cap of ONTX heading into Phase-3 would be in excess of $300m.  Alas, it wasn’t.  And Onconova is teetering on the brink of insolvency or, at least, crippling financial impairment.

Meanwhile, Cyclacel has moved on from the unraveled SEAMLESS pivotal study mentioning sapacitabine only as an aside in their corporate presentations.  Their second generation CDK2/9 Inhibitor now stands atop the pipeline depth chart.

Make no mistake, though, CEO Spiro Rombotis has his eyes pinned on the results of Onconova’s INSPIRE study as it will become a referendum on the future of sapacitabine.  You see, SEAMLESS had one very significant feature – a substantial increase in the amount of Complete Remissions (CR) in targeted elderly AML patients age seventy and above.  Rombotis, to this very day, alludes to submission for regulatory approval in the EU for sapacitabine on the basis of this one secondary endpoint in conjunction with Dacogen approval given on a failed, Phase-3 registration effort.  And while on its face that seems laughable, his case could be bolstered by INSPIRE success because Onconova CEO Ramesh Kumar will then take to plugging the frontline trial of oral rigosertib in combination with azacitidine which will highlight a primary endpoint of…wait for it…Complete Remissions.  How long will it take Spiro Rombotis to begin referencing rigsertib’s pathway as a model for sapacitabine regulatory approval?  And whether the comparison is valid or not, the market of easily influenced retail investors will lap it up driving CYCC’s stock price higher and higher.

Concluding Remarks

While rigosertib is pulsating with life in a promising pivotal fight, sapacitabine rests on the sideline ready to awaken if rigosertib rises from the dead.  Cyclacel, with its bloated $40m market-cap, sea of warrants and preferred shares, at a glance, seems less attractive than Onconova.  But its financial position, by comparison, is enviable.  Both companies have late generation CDK Inhibitors to develop if the door closes on those earlier assets.  But the play here is to bet that there’s more than a crack in the opening to relevance for both rigosertib and sapacitabine forming a widening wedge of investment light.

Always be well…

Thaumaturgical Disclaimer: As a practicing person of magic and aspiring warm-hearted wizard, I’ve utilized tarot cards as a basis for sub-analysis of biotech equities for the past three years and in my personal life for nearly four decades.

Mental Illness Disclaimer: I’ve been diagnosed as suffering from manic depression. Therefore, my reactions to events can sometimes be more pronounced than the facts warrant.  I owe investors complete transparency and am the only ideator in biotech to provide that.  Please focus on the ideas presented and don’t hesitate to contact me with any factual errors found in the article text.

General Disclaimer: Any information or opinion expressed herein may not be true, accurate or correct and it does not constitute a suggestion to buy, sell, hold or adopt any investment strategy for this stock or any stock that may be mentioned. Reliance upon information in this article is at the sole discretion of the reader. The sole purpose of my article is to entertain by providing an opinion and information the accuracy of which is as good as the public sources it was derived from. For example, KOL’s often utilize exaggerative terminolgy to describe a product or asset they are promoting on behalf of a biotechnology company they’re associated with. Do not act on anything I have written, a CEO has spoken of, or a sell side analyst has stated. Rather, do your own due diligence and consult a professional investment advisor before making any investment decision. Acting on what any one writer has imparted to you is foolish at best. I have no better access to resources than you do. I sometimes make mistakes. And there are a myriad of things, which can happen in lieu of any forward-looking statement I have made. Any stock featured or mentioned in an article I compose is subject to all manner of influences, which can change its value in dramatic fashion both higher and lower. These events can be of a wide variety – news related; managerial decisions; trial failures; stock manipulations; and so on. I make every effort to declare positions I have in stocks I cover or mention in an article but reserve the right to move in and out of said investments at my own discretion based upon the wisdom of doing so. I implore you to do your own due diligence and invest at your own considerable risk attaining the just reward your efforts have wrought. Additionally, if you are aware of any misstatements of fact contained in this or any article I have written, you are encouraged to email me immediately at the link given in the header above or address them in the comments section.

Onconova Therapeutics: I Am Inspired!

Warning: This article covers a nano-cap equity (a stock trading at a market-cap below $50m).  At this level of capitalization the word “gambling” is more appropriate than the word “investing” where taking a position is concerned.
Disclosure: I am long Onconova Therapeutics (ONTX) and Cyclacel Pharmaceuticals (CYCC).

Blogging in relative anonymity on my own website is appealing to me on so many levels.  The greatest benefit, however, is the ability to be completely honest about the equity I’m covering.  Too many times, I would be accused by readers of being a “secret short” – someone who wasn’t really invested in the company but was cleverly trying to drive the share price lower for profit.  That never happened!  And it’s not going to happen!  Rather, I will continue to be brutally honest because that’s the only way I can sleep soundly at night knowing that I have a secure grasp on the risk I’m taking.

The purpose of this article is to give the reader insights into the equity known as ONTX that they won’t find anywhere else.  I’ll discuss the following topics in detail.

  • Why I believe the (INSPIRE) Phase-3 trial is destined to succeed.
  • Why the FDA is supportively working with Onconova CEO Ramesh Kumar.
  • The particulars of the SymBio developmental and commercial agreement with Onconova and why it matters.
  • How the strained financials of the Company could lead to an investor unfriendly merger or ruthless dilution.
  • And why a beaten down equity with sound science represents the best value in developmental biotech.

The Gruesome Cause For (INSPIRE) Success

I wish I could tell you that it is the awesome power of rigosertib in high-risk MDS patients that is fueling my optimism for a positive outcome in the registration trial known as (INSPIRE) but it’s not.  Yes, intravenously administered rigosertib was proven to be more beneficial than best supportive care in patients with excess blasts in the failed (ONTIME) study, although, not in a statistically significant way.  And in a large subset of high-risk patients mostly unresponsive to hypomethylating agents (azacitidine (AZA) or decitabine (DAC)) it performed slightly less well.  But it was the control group of best supportive care (BSC) in this corralled subgroup that folded like a $10 tent in a 10 mph windstorm that has my profit meter pegged green.  The following Company graphic from the Pioneers Conference held on May 2nd explains it better than words can.

The (INSPIRE) inclusion protocol is based upon this 131 patient subset depicted on the right.  When we compare the median overall survival of patients in both intent to treat (ITT) populations, we see that rigosertib patients in the larger (ONTIME) venue lived approximately 8.2 months compared to 7.9 months in the (INSPIRE) subset – a falloff of approximately 9 days.  In the BSC arm, we see patients surviving approximately 5.9 months in the larger (ONTIME) study group compared to 4.1 months in the (INSPIRE) subset – a decline of 1.8 months or 55 days.  Analysts will naturally look to see an improvement in the active arm which they won’t find and will be inclined to dismiss degradation of performance in the control arm as an aberration that will be corrected in a larger study.  While this usually makes sense, in this particular instance, it doesn’t make any sense at all.

  • This subgroup of 131 patients is comprised of those who did not respond to HMA therapy.  And they will most likely be given HMA therapy again plus BSC in control.  If it didn’t work once, it likely won’t work twice.
  • On the battlefield of cancer psychology a positive attitude is predicated upon an intelligent body communicating with a cooperative mind.

Now, I know that a lot of you will jump in and say, gobbledygook Mike, gobbledygook.  Not over the first bullet point, which is fairly self-explanatory.  The notion of an intelligent body, however, is an affront to the Western mindset, although, it shouldn’t be.  Most illnesses are cured not through the administration of active therapies but, rather, by allowing the body to heal itself through rest and the quieting of the mind.  Most of the healing in instances of trauma takes place by sedating the patient so that their mind induced panic doesn’t inhibit that  process.  And while the mind can work against the body’s natural ability to regain equilibrium, it can also aid in that process.  Visualizations, for instance, that are at once relevant and detailed have been shown to do this.  And if the body is communication something positive to the mind regarding a change for the better, the mind will be inspired by that information to reinforce that direction.  Conversely, if the body is saying, “we’ve been down this pathway before and it didn’t work” then the mind will reinforce that direction by acquiescing.

Given these two truths, I expect that patients in the control arm of the (INSPIRE) study will perform at the same diminished rate as they did in the subgroup defined above.  Active arm patients, however, will be given a new drug – rigosertib and their bodies will be stimulated to fight their cancer in a new manner that will also serve to trigger patient optimism.  Having already failed one round of HMA therapy, they won’t perform as well as they did in patients from that larger population, many of whom had success, but they will engage their disease with more vigor.  Consequently, I expect almost the same performance in the (INSPIRE) setting as we saw in that subgroup of 131 (ONTIME) patients.  That being the case, in my estimation, (INSPIRE) will be a raging success.

For specificity on the inclusion criteria, we find the following information from page 3 of the 2016 Annual Report (10K).

The INSPIRE trial will enroll higher-risk MDS patients under 82 years of age who have progressed on, or failed to respond to, previous treatment with HMAs within nine months or nine cycles over the course of one year after initiation of HMA therapy, and had their last dose of HMA within six months prior to enrollment in the trial.

The Fukushima Effect

In a curious connection made only on this platform, the FDA and SymBio Pharmaceuticals are operating from the same realization – instances of leukemia in Japan and the United States are going to rise rapidly over the next decade.  I’ve already extensively addressed this phenomenon in an article you’ll find here on my website but rates of AML, MDS and lymphomas of all kinds will rise exponentially in Japan.  When news of this finally hits the shores of this country, the U.S. government will have some explaining to do.  It will be very important at that time for the FDA to be able to say that they’ve been approving new therapies to treat these swelling patient populations.  From SymBio’s perspective, it’s all about profit.

Listen to Onconova CEO Ramesh Kumar speak at various presentations and, if you have ears to hear, you will understand that the FDA is doing everything possible to drag rigosertib across the regulatory finish line.  It is a drug that helps patients.  And there hasn’t been an approved therapy for over a decade.  But the FDA isn’t known for coddling companies that aren’t in that large-cap club.  They are known, however, for cudgeling them along to near death.  Few expected that the FDA and Onconova would agree to another registration effort let alone so quickly.  And even now, we find them exhibiting a degree of flexibility I haven’t encountered since the agency’s interactions with Vanda Pharmaceuticals (VNDA) over tasimelteon development in 2013.  Just listen to Ramesh Kumar at the recent Q1 Conference Call talk about statistical assessment of the trial.

Our statistical analysis plan, now under review by the FDA and EMA, will provide the basis for data analysis at the interim and top-line intervals. We expect this review to be completed in the second quarter.

In this analysis, the INSPIRE study design permits two looks into the study populations, ITT, as well as a predefined IPSS-R very-high-risk subgroup, providing two shots on goal with the data.

From this quotation, we can surmise two important aspects of the FDA’s involvement with Onconova management regarding this trial.

  1. That (INSPIRE) was allowed to enroll and progress prior to the completion of a statistical plan of analysis.
  2. That the FDA is so willing to approve rigosertib that they are providing an additional pathway involving a smaller, very-high risk subset of patients.

I’ve only been around the biotech sector for a scant four years but this is unprecedented in my experience.  And, from the investor perspective, it provides a second catalyst, or, at least, a second lifeline of hope where the issue of ultimate approval is concerned.

We Know A Lot About The SymBio Agreement

But like anything worth having, you have to dig for it!  We find the following details on page 7 and 8 of the previously referenced and linked 2016 Annual report.

Under the terms of the SymBio license agreement, we received an upfront payment of $7,500,000.  We are eligible to receive milestone payments of up to an aggregate of $22,000,000 from SymBio upon the achievement of specified development and regulatory milestones for specified indications. Of the regulatory milestones, $5,000,000 is due upon receipt of marketing approval in the United States for rigosertib IV in higher-risk MDS patients, $3,000,000 is due upon receipt of marketing approval in Japan for rigosertib IV in higher-risk MDS patients, $5,000,000 is due upon receipt of marketing approval in the United States for rigosertib oral in lower-risk MDS patients, and $5,000,000 is due upon receipt of marketing approval in Japan for rigosertib oral in lower-risk MDS patients.  Furthermore, upon receipt of marketing approval in the United States and Japan for an additional specified indication of rigosertib, which we are currently not pursuing, an aggregate of $4,000,000 would be due. In addition to these pre-commercial milestones, we are eligible to receive tiered milestone payments based upon annual net sales of rigosertib by SymBio of up to an aggregate of $30,000,000.

Further, under the terms of the SymBio license agreement, SymBio will make royalty payments to us at percentage rates ranging from the mid-teens to 20% based on net sales of rigosertib by SymBio.

While the details here are somewhat unexciting given the fact that leukemia rates in Japan are, as of 2012, roughly half that of those in the United States; the U.S. population is nearly 2.5 times larger than Japan (324m to 127m respectively) and drug pricing there is significantly lower; rates of leukemia are going to climb due to the ongoing catastrophe we now know as Fukushima Daiichi.  The press isn’t telling you this.  The governments of Japan and the United States aren’t telling you this.  But I am.  And I’m not going to be wrong.  It takes roughly 5 years for blood cancers to bubble up to the surface following severe exposure to radioactive particulates.  And the Japanese people, once made healthier by their predominantly seafood diets, are now in further trouble due to the daily drenching of the Pacific Ocean in hundreds of tons of radioactive water.

Why do you think SymBio happily signed this agreement in 2012 one year after the calamity, and stayed in it while Baxter backed out in 2015 after the (ONTIME) failure?  Why do you suppose that of the 169 (INSPIRE) sites worldwide there are 44 active in the U.S. and 33 in Japan?  Think about the stats that I gave you above.  Twice as many instances of leukemia in the U.S..  Two and one-half times the population.  But only a third more U.S. sites?  There should be at least 5 times as many sites in the United States.  One could attribute the disparity to the fact that SymBio is underwriting some of the associated costs thereby saving Onconova precious resources.  But the only other causal factor that I could imagine would be that sites are set up where patient demand is the greatest.

Think about it!

“Climb god damn it!  Climb!”

When the antihero of the movie, Swordfish clearly sees there won’t be enough runway to accommodate his airborne bus before it slams into an old fashion neon sign, he barks out the desperate order to climb.  What appears to be an unfortunate inability to avoid a catastrophic outcome is, in reality, just enough to accomplish the plan at hand.  And that’s precisely the position Onconova finds itself in today – a shortening runway in front of a lengthening need for cash.  Whether Ramesh Kumar is as resourceful as the mastermind in this fictional tale has yet to be determined but he’ll need to be every bit as savvy.

I’ve already addressed Onconova’s financial predicament in a cautionary video entitled; ONTX Nearing the Fiscal Cliff.  This production dispels the notion that the planned Phase-3 trial of oral rigosertib in conjunction with azacitidine is being delayed due to ongoing discussions with regulatory bodies.  It’s not!  It’s being delayed because they don’t have the money to run these trials in parallel.  It’s also why promising preclinical candidates remain bound in the out-of-clinic domain.  There’s just no money.

The Company spent $8.3m last quarter alone and had roughly $20m in pro forma cash and cash equivalents at the end of that quarter.  I’d like to think that newly published data at ASCO in June from the (ONTIME) study subset of patients would cause the stock to rally enough to allow for another, perhaps, more substantial equity raise.  But that notion is doubtful since retail investors are still licking their wounds from that $2.49 per share $5m gouge back in April.

There might be other means of seeing (INSPIRE) through to the 2H of 2018 topline data readout.  A partnership could be struck on those preclinical candidates.  Or, perhaps, one could be sold outright.  A commercial and developmental agreement could be struck for rigosertib in the U.S. or ex-U.S. territories other than Japan and Korea.  But I’m not too sure how the Baxter agreement impedes upon those aspirations.  Loans, at this stage of the game, are unlikely.  Although, if Ramesh Kumar is buying his own rhetoric as I am, he might be able to collateralize such a loan to keep the ball moving forward.  Tapping the notorious Lincoln Park agreement at these prices seems too little in a situation that is rapidly becoming too late.

An Unfavorable Merger Seems Increasingly Likely

The only method of obtaining cash that makes sense to me at this point would be a merger with a company that has cash but no existent commitment to a compound in hand.  That fallback outcome could prove disastrous to current shareholders unless, of course, you own shares in that equity as well.  I, for instance, would love to see Onconova merge with Cyclacel Pharmaceuticals (CYCC).  The latter has money, although, not much of it.  They attractively carry a comparatively miniscule burn rate.  The new company would prioritize the (INSPIRE) trial and sport two of the most promising CDK Inhibitors to hit the clinic in 2018.  The combined market-caps would be less than $40m but would rocket higher given the derisking of the (INSPIRE) trial and synergies relative to their hematological platforms.

I know that biotech executives read my articles even here on this lowly side road of equity analysis.  I also know that they’re not alone.  Hedge fund managers and other contributors from established platforms peruse my ideas.  They shudder to think how they missed out on that Cyclacel double earlier this year.  Maybe they’ll feel better knowing that the run-up took place too near to my publishing an article for me to sell into that strength.  I have principles where others do not.  Another, ah shucks moment for me.  But if, per chance, you, Ramesh Kumar, are reading this now, please know that you are always in the care of heaven above even when the waters below are aflame in doubt.  Trust in this trial.  Trust in what you have fashioned.  It’s real.  And it’s good.

Investing In What Others Throw Away

If you haven’t noticed already, I like investing in companies that have been abandoned by other investors.  Not because I feel sorry for them.  I don’t!  Not because they remind me of me.  They do!  But mostly because as the value proposition changes for the better lazy investors fail to recognize that the change has taken place.  And that becomes a very, very profitable realization as long as you make it early enough to get in before their reawakening takes place.

Always be well…

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