At the end of last month, development stage biotechnology company Advaxis, Inc. (NASDAQ:ADXS) announced a collaboration between it and Bristol-Myers Squibb Co (NYSE:BMY). The collaboration will see the two companies team up to investigate the impact of a combination of one of Advaxis’ lead assets, and Bristol-Myers Squibb’s Opdivo, in women with metastatic cervical cancer. In response to the news, the company picked up a little bump in market capitalization but has since depreciated considerably and currently trades for a little over $6.77, down more than 16% on its End-May pricing.
Now, this is a company with quite a lot going on, and so the Bristol-Myers Squibb collaboration only accounts for one of a few valuation inputs as things stand. With that said, however, we feel that markets have overlooked the importance of the collaboration, or are focusing on what it suggests about an alternative collaboration (with AstraZeneca) in a similar combination of assets as informative of bias.
With this in mind, we think there is an opportunity to pick up shares at a discount ahead of a reevaluation on the Bristol-Myers Squibb collaboration maturing through to completion.
The deal is rooted in the combination of Opdivo, as mentioned, and an Advaxis asset called ADXS-DUAL. The mechanism of action of both suggests that this sort of combination could be incredibly effective in a variety of cancers (we will go into a little more detail as to which shortly), of which the target cervical cancer is one.
Opdivo is what’s called a PD-1 immune checkpoint inhibitor. Many cancer cells express a protein called PD-L1, which attaches to a checkpoint protein on T cells called PD-1 and, in doing so, basically tells the immune system to leave it alone. The binding acts as a mechanism through which cancer cells are able to hide from T cells and avoid detection and – by proxy – attack/removal. Opdivo stops PD-L1 from binding to PD-1, essentially removing the cancer cells ability to suppress itself from identification by T cells.
That’s one half of the combination.
The other half, ADXS-DUAL, takes advantage of the fact that many cancers (including cervical) are caused by human papillomavirus, or HPV, infection. Infection of cervical cells by HPV can result in the conversion of normal cells on the surface of the cervix into cancerous cells. These cells are identifiable by ADXS-DUAL by way of their expression of receptor associated with HPV. The drug seeks out HPV-infected cells and infects them with listeria (which is easily recognizable by the immune system), and the immune system then gets to work killing the listeria infected (cancerous) cells.
The idea is, then, that Opdivo will clear the way for immune cell recognition by removing the PD-L1 from the equation and then ADXS-DUAL will go in and get to work killing the cancerous cells.
This is a big deal as it could potentially mark the start of a long-term collaboration between the two companies based on HPBVexpression. Many solid cancer types express this virus. If the first program pans out, each of these alternative cancer types could be targets for forward programs.
So why is this a step forward for Advaxis?
Well, two reasons. First, it’s looking increasingly like the trial that investigates this combination will be a phase 3 study, meaning the company won’t have to fund a drawn-out development pathway through early stage into late stage and application.
Second, and this is a part of the deal that we feel has been misinterpreted, it means that Advaxis is heading into its first PD-L1 combo registration trial with what we regard as the leader of the pack in this space. The alternative was to do so with AstraZeneca and its own drug of this type. Many are reading the abandoning of the AstraZeneca registration trial (at least, for now) as negative. As far as we are concerned, however, the company only has resources to carry out one phase 3 trial on this program and it has made its decision to go with the Bristol-Myers Squibb asset by way of opportunity cost analysis.
In other words, if yo can only choose one, go with the asset that gives the most chance of a positive outcome; and that’s what the company has done.
The registration study should take off during the second half of this year.
Before acting, make sure you get up to speed with this one by reading our previous coverage available here.
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Disclosure: We have no position in any of the securities mentioned and have not been compensated for this article.