Is Spring Bank Pharmaceuticals Undervalued?

By Jim Morrison

Savvy investors keep an eye out for clinical-stage biopharmaceutical companies that could become the next Regeneron or Gilead.  The trick is to catch them early and pick the right time to invest in an undervalued but successful company. A company developing transformational therapy means results could be significant for both patients and investors.  Spring Bank Pharmaceuticals (Nasdaq, SBPH) is one to watch. They are developing compounds that could provide more effective treatment for millions of patients suffering from a variety of diseases. The company has two promising clinical stage candidates and a stable financial outlook that should allow Spring Bank to continue to make significant achievements in the next two years.  Announcements are expected as early as the fourth quarter of this year from their hepatitis B virus (HBV) combination trial with collaboration partner Gilead (inarigivir + Vemlidy®). Longer term, their proprietary compounds could be added to treatments for a significant number of patients to help restore normal cellular function and allow the body to heal itself.

With a recent $20 million strategic financing, Spring Bank has reported that it has sufficient cash to operate the company beyond the end of 2021.  In the next 15 months, management believes significant potential catalysts and multiple clinical data readouts will occur for Spring Bank’s two most advanced programs.  Management believes the stock price neither reflects achievements to date nor the continued advancement of internally developed assets. More achievements in the near future can only help their case.  Recently, scientists from Yale Cancer Center presented intriguing results at the 2019 ASTRO meeting that Spring Bank’s proprietary STING agonist candidate, SB 11285, was synergistic and enhanced the effectiveness of radiation therapy for certain cancers.  

Spring Bank’s potential treatments are scalable based on well-established development processes and operations, and their proprietary compounds typically require fewer steps to manufacture than many currently used small molecule drugs.  The compounds can be formulated for use as tablets/capsules, injections or other dosage forms. Their two most advanced programs include: (1) inarigivir, an orally-available, hepato-selective immunomodulator in multiple Phase 2 trials for the treatment of chronic HBV and (2) SB 11285, an intravenously (IV)-administered STING agonist soon entering a Phase 1 clinical trial for the treatment of certain cancers.  Spring Bank is also developing other novel, proprietary therapeutics to meet large and unmet needs.

Pontifax Medison Finance (PMF), a healthcare-dedicated venture debt fund, recently provided the $20 million convertible debt facility for four years with no required payments of principal for two years.  The conversion option is at $8.76 per share. Momi Karako, a partner at PMF, said Spring Bank “has demonstrated expertise in the science behind novel treatments for current unmet medical needs.” He also identified Spring Bank as developing breakthrough solutions and transformative, cutting edge life sciences technology. 

Chronic HBV, cancer, and a variety of inflammatory diseases are often caused in part by immune dysfunction at the cellular level.  With the development of its small molecule nucleic acid hybrid (SMNH) platform, Spring Bank is aiming to harness the patient’s own immune system to defeat these cancers and cure viral diseases on a global scale.  These are clearly large and unmet needs.

Spring Bank is developing a novel class of therapeutics using its SMNH platform.  The company designs its compounds to selectively target and modulate the activity of specific proteins implicated in various disease states.  Spring Bank’s compounds are able to mimic the recognition and interaction between cellular components so that new and existing therapies will increase in effectiveness when combined.

Spring Bank now has two product candidates in clinical development.  The company’s lead product candidate, inarigivir, is designed to activate within infected cells a gene which has been shown to inhibit HBV viral replication and induce antiviral defense in the patient’s body.  Inarigivir is being studied in four Phase 2 studies in HBV, including a study being conducted by Gilead Sciences (Nasdaq, GILD) involving the co-administration of Spring Bank’s inarigivir and Gilead’s Vemlidy ® (tenofovir alafenamide 25mg).  Spring Bank’s other most advanced product candidate, SB 11285 (IV), is a potential second-generation immunotherapeutic agent for the treatment of selected cancers. Spring Bank’s chemists have developed a unique chemistry for SB 11285 allowing it and other compounds to be administered clinically through multiple routes of delivery, including intravenously.  Over the summer, the FDA approved SB 11285 (IV) for a Phase 1 clinical trial and the company recently launched this first-in-human Phase 1 trial.

In addition to their continued research at the Yale Cancer Center, Spring Bank announced a collaborative research agreement with the University of Texas Southwest Medical School.  Dr. Scientists at UTSW Medical School are evaluating Spring Bank’s novel small molecule STING antagonist compounds in mouse models of autoimmune and inflammatory diseases. Clinical collaboration partners at Gilead have further expanded their co-administration trial involving inarigivir.  Spring Bank has entered into a research agreement with the National Institute of Allergy and Infectious Diseases (NIAID), part of the National Institutes of Health, to evaluate antisense oligonucleotide compounds to treat HBV.

Spring Bank is harnessing nucleic acid technology to develop its SMNH platform.  SMNH drugs treat immune dysfunction at the cellular level. SMNH drugs are designed with properties that enable them to recognize and interact with nucleic acids and proteins much like natural nucleotides and nucleic acids and proteins do in cells.  Chemical modifications to these SMNH compounds give them drug-like properties and have several advantages: they have a novel mechanism of action, including induction of the innate immune response; they can be administered by multiple routes of delivery; and they target a broad range of diseases, including viral, oncological and inflammatory diseases.

Spring Bank’s compounds appear to have real promise.  Trials of individual drugs and therapies will continue, but it seems clear that Spring Bank could produce compounds that will increase the effectiveness of treatment for a large number of patients suffering from a variety of diseases.  Like many other small- and micro-cap biotechnology companies, Spring Bank’s market valuation has declined recently. With two clinical programs, multiple data readouts, high quality partners and a cash runway beyond 2021, it would seem appropriate to conclude that Spring Bank does fall into the “undervalued” category.  These potentially transformative therapies have excellent growth prospects. Savvy investors should keep an eye on Spring Bank Pharmaceuticals since it may well be undervalued, and the company is poised for what appears to be positive clinical developments. 

 

 

Disclaimer: This content does not necessarily represent the views of IWB.

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