Replimune: Unchanged Since IPO, Run-Up Expected Into Clinical Data

At this moment, shares of Replimune Group (REPL) are essentially unchanged from their July 2018 IPO price point of $15. The company initially drew my attention for several reasons, including impressive leadership lineup (ex BioVex management team), collaborations with big pharma and its goal of carving out a niche in a unique space in the oncology landscape (oncolytic immuno-gene therapy).

Couple that with important data readouts in 2H 2019 and 1H 2020, and that's reason enough for us to dig deeper to determine if there's an opportunity to exploit in the near to medium term.


Figure 1: REPL daily advanced chart (Source: Finviz)

Figure 2: REPL 15-minute chart (Source: Finviz)

When looking at charts, clarity often comes from taking a look at distinct time frames in order to determine important technical levels to get a feel for what's going on. In the first chart (daily advanced), we can see that shares hit a high of $22 in Q3 2018 before the sector correction took it down to $10 (bottoming at the beginning of the year). From there, the stock has certainly shown signs of life (currently trading above multiple key moving averages). In the second chart (15-minute), we can see some strength in the name over the past few days (today's loss on low volume so far).


Replimune was founded in 2015 by the management team of BioVex, which was acquired in 2011 by Amgen (NASDAQ:AMGN) in a billion dollar deal ($425 million upfront, $575 million in development in sales milestones). The key asset acquired, genetically modified oncolytic viral therapy marketed as Imylgic, was approved in 2015 by both the FDA and EMA (peak annual sales of $200 million or so).

Immuno-oncology is an incredibly crowded field, with several approaches being tried out to make immune checkpoint blockade effective for most cancer patients (currently best responses are only in patients with pre-existing immune response and inflamed tumors). While I was initially skeptical considering many companies out there are claiming to "turn cold tumors hot," prior evidence already exists showing this unique approach has synergies with checkpoint inhibitors such as ipilimumab.

Figure 3: Impressive T-VEC combination data shows doubling of response rates with solid safety profile (Source: corporate presentation)

Replimune's objective is to build on management's previous success to maximize effectiveness of oncolytic immunotherapy by exploring various initiatives, such as loading multiple immune stimulating genes and extending utility to other solid tumor types.

A very logical approach is being taken, first going after "easier" indications in order to gain regulatory approval. This would be followed up with increasingly more challenging tumor types in a stair-step, incremental fashion. There's still substantial risk involved, but if management can pull it off becoming a universal combination agent for anti-PD1/L1 drugs, patients and shareholders stand to benefit.

The company's immulytic platform incorporates a proprietary strain of herpes simplex virus armed with a fusogenic protein enhancing its ability to kill cancer cells and delivering immune stimulating proteins directly to tumors. Again, seeing language on the website such as "achieve the holy grail of personalized anti-cancer vaccines" immediately sets off my skepticism, but its approach does make sense on several levels (using intratumoral injection to overcome challenges involved with IV-administration).

The RP-1 clinical strategy involves the so-called rapid path to approval, namely going after tumor types that are already known to be sensitive to anti-PD1 agents.

Figure 3: RP1 clinical strategy (Source: corporate presentation)

For the indication of cutaneous squamous cell carcinoma or CSCC, four thousand to nine thousand deaths occur annually in the US and it's expected to overtake melanoma as the most lethal skin cancer. While Regeneron's cemiplimab has shown activity (46% response rate), that's unfortunately come with low rate of complete responses. The indication also seems ideal in that the majority of tumors are accessible for direct injection and there is substantial unmet need here.

Other efforts including intratumoral anti-CTLA-4 and co-stimulatory pathway agonists are set to enter the clinic in the next quarter and 1H 2020, respectively. The former could be interesting as it could overcome a key obstacle (reducing toxicity) and potentially improve activity as compared to current combination of anti-PD1/anti-CTLA-4.

While the company is currently manufacturing product candidates utilizing CMO (contract manufacturing organization), a 63,000-square foot facility was leased last year and should come online in the first half of 2020 (management recognizes that control of logistics is critical to long-term success).

Select Recent Developments

Back in September of 2017 the company raised $55 million in a Series B financing led by Foresite Capital. Other key institutional investors involved included Bain Capital Life Sciences, Redmile Group, Cormorant Asset Management, Atlas Venture and others. Interestingly enough, Foresite Capital's Dr. Brett Zbar joined the board of directors as did Dr. Kapil Dhingra (former head of clinical oncology at Roche (OTCQX:RHHBY)). Long-time readers are aware that in ROTY we consider a track record of advantageous access to capital as a green flag to take note of.

In September of 2018, the company announced that the FDA accepted its Investigational New Drug application for lead product candidate RP1 for patients with solid tumors. As a result, the ongoing phase 1/2 study (in UK) was opened in the United States. The first stage evaluated safety and tolerability of RP1 monotherapy, while the dose escalation phase combined the asset with nivolumab. The combination is being tested in 120 patients with metastatic melanoma, metastatic bladder cancer, microsatelite instability high cancers and non-melanoma skin cancers. As alluded to above, patients need to be naive to immune checkpoint blockade (except for those with melanoma). Keep in mind that Bristol-Myers Squibb (NYSE:BMY) is providing nivolumab for use in the trial.

At the beginning of 2019 the company released a progress report, projecting its cash position to be sufficient to continue operations into the second half of 2021. Aside from the above trial in solid tumor types, Replimmune also reminded Wall Street of its intention to initiate a pivotal randomized controlled phase 2 study evaluating 240 CSCC patients (to receive Regeneron's cemiplimab alone or in combination with RP1). Keep in mind that cemiplimab was approved for the treatment of locally recurrent and metastatic CSCC last year.

For the company's second asset RP2 (version of RP1 that also expresses genetically encoded anti-CTLA-4), a phase 1 study alone and in combination with anti-PD1 therapy is still planned for the first half of the year. As for RP3 (also expresses CD40L to activate innate and adaptive immunity along with 4-1BBL to activate CD137 and promote expansion of cellular and memory immune responses), a phase 1 study alone and in combination with anti-PD1 therapy is planned for the first half of 2020.

Lastly, in April the company announced presentation of a poster session at the American Association for Cancer Research annual meeting.

Other Information

For the most recently reported quarter, the company disclosed cash and equivalents of $141.8 million (roughly 1/4 of market capitalization). Net loss increased to $7.7 million, while research and development expenses more than doubled to $7.9 million. G&A also increased to $2.3 million.

As for future catalysts of note, data from the phase 1 portion of RP1 clinical study (monotherapy and combination with nivolumab) will be presented at a medical conference in 2H 2019. Additional trials mentioned above (phase 2 study of RP1 in CSCC and phase 1 study of RP2) should get underway in the first half of the year.

Figure 4: Key upcoming milestones (Source: corporate presentation)

As for institutional investors of note, significant stakes are owned by Omega Fund Management, Forbion Capital (15.75%), Bain Capital Life Sciences Investors, Redmile Group (6.9%), BVF (5.1%) and Foresite Capital.

As alluded to prior, another strength of the company is a talented management lineup with significant depth (most hail from BioVex where they've already experienced success once and have a roadmap to do so again). Co-founder and CEO Robert Coffin previously founded and was CTO of BioVex, having invented all BioVex products including Imlygic and overseeing all clinical development through dual pivotal phase 3 studies.

Final Thoughts

To conclude, we've uncovered an early-stage platform story with the lofty objective of becoming "universal combination partner for PD-1/L1 therapies potentially applicable to all solid tumors." Considering that the market for these best-selling oncology drugs is thought capable of reaching $30 billion or more, even experiencing a modicum of success in a few of the indications Replimmune is going after could result in significant upside. The company also has a substantial base of knowledgeable institutional investors and a management team that instills confidence given its success the first time around with BioVex.

For readers who are interested in the story and have done their due diligence, I suggest initiating a pilot position in the near term and accumulating dips for the run-up into data readout 2H 2019. In the event of the said run-up, it wouldn't be a bad idea to take some profits and risk off the table.

Risks include disappointing data in 2H 2019, clinical setbacks including delays in trial initiations and safety signals, substantial competition for certain indications and the possibility of further dilution (another financing not likely until late in 2019 or more likely 2020).

As for downside cushion and elements of derisking, the cash position accounts for about 25% of market capitalization. There is an element of derisking given the prior success of T-VEC, but we still need further data sets for the kind of derisking I typically look for.

For our purposes in ROTY, the stock is not yet a suitable candidate given lack of clinical data. I'd look forward to revisiting and re-evaluating after initial data in 2H 2019.

Author's Note: I greatly appreciate you taking the time out of your day to read my material and hope you found it to be helpful in some form or fashion. If you're willing, I look forward to interacting with you in the Comments Section. Whether bull, bear or simply a skeptic, we all typically have something worth saying and feedback (plus community-driven due diligence) is one of the reasons I enjoy writing. Have a good one!

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