Six months ago we put forward this argument as to why we felt Kura Oncology Inc (NASDAQ:KURA) was undervalued. Our thesis was rooted in the fact that the company had a spate of catalysts set to hit press throughout 2017 and that any one of these catalysts had the potential to inject some serious upside momentum into the stock.
For those that missed our coverage, we listed a number of ongoing clinical trials as important events to keep an eye on and highlighted one in particular, a phase 2 study investigating an asset called tipifarnib in a solid tumor indication, as being one that would really get things moving if it hit press as positive.
Fast forward to today, and we just saw the company release the data in question. As expected, the news has brought about a large upside revaluation for Kura and – in turn – a nice return for any holders that picked up an exposure ahead of the event. Towards the end of the week last week, Kura went for around $6.85 a share. On Friday, and subsequent to the news, the company traded at just shy of $14 a piece and closed out the week (to open on Monday) at $11.80 a share. As a more than 100% increase to highs and a 72% run between session open and close.
So why is this such a big deal for Kura?
The company is running a number of clinical trials, as mentioned, but pretty much all of them (at least, that is, all of the ones that matter near term from a value perspective) are rooted in the tipifarnib asset.
We went into detail on the science behind this one last time, but for those that missed it, the drug is designed to latch onto what’s called an FT enzyme. FT enzymes, in a normal environment, will link to a protein called Ras and activate it. Once activated, the Ras protein kicks off the processes that underpin cell proliferation and replication. In healthy patients, this is fine. In patients with cancer, however, and especially solid tumor type cancers like that under investigation in the above-mentioned trial, and unregulated Ras protein can lead to the unchecked cell proliferation that characterizes the disease. The idea is that by having tipifarnib link to FT enzyme, the latter is then unable to link to the Ras protein, meaning it doesn’t get activated and doesn’t cause proliferation in cancer cells.
That theory, at least, and the phase 2 trial that has caused this one to move was designed to reinforce the theory with some real-world results. And that it has.
As per the news, from six evaluable patients, there were four confirmed, partial responses and two patients with disease stabilization were observed. It’s a small trial, and with only six evaluable patients there is a bit of room for statistical error, but that’s not really the point here. This is an incredibly tough to treat population (all of the patients had received, and failed, previous standard of care treatments) and that tipifarnib can bring about any degree of response is a strong indication of efficacy. That he did so in all six patients is even better.
So what’s next?
It’s now up to Kura to build on this data. The company is still enrolling patients in the trial (although it has technically already hit its primary endpoint) and will continue to collect data on these patients as they progress through treatment. This data (the expanded data set) will then be hope for presentation at a near-term medical conference. When this conference takes place, we expect it to compound the recent upside run, assuming the data falls in line with that we’ve just seen, and this makes the event very much want to keep an eye on between now and the end of the year.
Cash on hand at the end of June was a little over $12.1 million, meaning dilution risk is minimal right now. Add to this the $41 million that the company has in short-term investments and said risk gets even smaller.
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Image courtesy of Ed Uthman via Flickr
Disclosure: We have no position in KURA and have not been compensated for this article.