JNJ Shows Interest in OSTX Antibody Drug Conjugate Platform Tech

Johnson and Johnson (NYSE: JNJ) is beefing up its oncology program with antibody drug conjugates (ADC’s).  JNJ’s incubator business called JLABS recently held an oncology event in Boston. OS Therapies Inc (NASDAQ: OSTX) was not only invited to the event but also announced it was accepted into JLABS to develop its tunable ADC linker-based platform that relies on pH sensitive linkers and coating technology to reduce off-target effect into order to improve both safety and efficacy.  

ADC’s are designed to target the cancer by using antibodies with a chemotherapy payload attached to find and seek cancer cells with the specific receptor and then deliver the chemo to the cancer cell.  The concept behind ADC’s is that they will reduce the side effects of chemotherapy because they are more attracted to cancer cells versus fast replicating healthy cells. JLABS has a history of doing deals with its parent JNJ which means that OSTX membership in JLABS would likely yield a valuable partnership with JNJ in the future.  

Membership in JLABS also represents a value inflection point for OSTX.  OS Therapies is primarily known as an orphan drug company but the JLABS membership elevates the other less well known technology within the company.  While the ADC technology always had value, this recent news spotlights the potential value of the technology which could run into the billions given the recent comparables below.   

Recent ADC Mergers & JV’s

JNJ’s acquisition of Abrx Biopharma in January 2024 for $2.0 billion demonstrated their desire to dominate in this type of oncology treatment.  They paid a 105% premium over the market price and that is well above the $40 million collaboration with Mersana Therapeutics for their ADC platform tech in 2022.    

Genmab A/S (NASDAQ: GMAB) closed another notable ADC acquisition in May 2024 for $1.8 billion.  They acquired the privately held company ProfoundBio, Inc. which was focused on FRα-targeted and Topo1 ADC’s for the treatment of ovarian cancer and other FRα-expressing solid tumors.

Merck (NYSE: MRK) acquired biotech startup Abceutics for $208 million for their linker technology which was in the preclinical phase.  French biotech Ipsen signed a $900 million agreement with Sutro Biopharma for its preclinical ADC STRO-003 in April 2024.  The significance of both of these acquisitions is that Sutro’s and Abcetuics drugs were in the preclinical stage while OSTX is more advanced and at the end of Phase 1 which would command a much higher valuation than either of these.  

‍Investment Summary

OSTX has a market cap below $100 million and recently came public with 1.6 million shares in the float.  The company has 2 platform technologies and the potential of a veterinary deal.  The orphan drug platform technology is worth a billion or more since it has a breakthrough designation.  Big pharma is actively doing deals with ADC technology.  The pace and frequency of deals is gaining momentum.  The JLABS deal is a very significant value inflection point for OSTX as it symbolizes JNJ’s intention to acquire or partner the technology which means the company is unlikely to undergo another round of financing.  The bulk of the ADC deals are done in the preclinical stage which means there might not be a long wait time until a deal is consummated.  With only 1.6 million shares in the float this stock has some big squeeze potential as the shorts have to see the writing on the wall. Shorts were active on the second day after the IPO covering after they realized how tight the float was.  Investors should put OSTX on their watch list and if volume increases above 250,000 average daily volume a short squeeze could ensue as investors realize the greater probability of a deal with JNJ in its future.

WHEN INSIDER FINANCIAL HAS A NEW COMPANY TO RESEARCH, IT IS IMPORTANT TO PAY ATTENTION. AFTER ALL, OUR FREE NEWSLETTER HAS PROFILED MANY TRIPLE-DIGIT WINNERS FOR OUR SUBSCRIBERS. WE ALWAYS ARE LOOKING FOR MOMENTUM BEFORE IT HAPPENS!

Disclosure: Insider Financial and its owners do not have a position in the stocks posted and have posted this article for free without editorial input. A guest contributor wrote this article and solely reflects his opinions.