Description

Long Onconova Therapeutics (ONTX). Tiny market cap ($6mm EV) life science company, and although the stock trades an average of 400k + shares per day, this idea is most suitable for PAs. I do not believe ONTX could be a zero, and I do see a path to the stock going up multiples from here if they execute. This, like other life sci ideas I have posted in the past, has IMHO a compelling upside / downside dynamic. The company has .75 cents in cash per share, but burns through it quickly as it is ramping up its several later stage trials, so they will need to find a partner or raise more equity. As I will hope to illustrate below, I do believe managment has demonstrated an ability to cut deals with industry partners. That said, this is a small position size for me, and in some respects, I am treating this as a “hero or a zero” type of investment.

On March 8, Onconova Therapeutics (ONTX) released financial results for the full year 2017 and also provided an update on recent progress. The Company continues to focus on executing the Phase III Inspire trial of IV rigosertib in patients with high-risk myelodysplastic syndromes, HR-MDS. Full enrollment of the study is expected during the first half of 2019. In addition to the Inspire study, Onconova is also conducting a Phase II expansion study of oral rigosertib plus azacitidine in patients with HR-MDS, and expects to complete enrollment in Q1 2018. The Company also executed a series of licensing deals that provide near term and potential funding in the future. Onconova’s pro forma cash is $14 million, which is expected to fund operations until approximately Q4 2018. 

ONTX’s Phase III and lead drug candidate, rigosertib, addresses a large market potential. Nearly 60,000 patients have MDS in the U.S., and of those over 13,000 fall into the high-risk category. MDS is a blood cancer resulting from bone marrow failure, and which can lead to AML. Full enrollment is expected in the first half of 2019, so the catalysts and data are a relatively short wait. Within the announcement of March 8, the company indicated that more than half the patients required in the expanded study have already been enrolled. This is important (positive), since this particular group had significantly longer median survivial compared to best standard of care in a previous Phase III….7.5 months as compared to 3.1 months. Further, a complete enrollment of an expansion Phase II oral study is expected within several weeks. 

Calendar of Milestones : 

April 17 :  Data presentation on developement of ON 123300 at American Association for Cancer Research.

Q1 2018 - Complete enrollment of Phase II expansion study of oral rigosertib. 

Q4 2018 - Commencement of Phase III trial of oral rigosertib.

First half 2019 - Complete enrollment of Phase III trial.

2019 - Topline results of trial.  

ONTX recently executed 3 deals related to the development and commercialization of rigosertib. In December of 2017, ONTX signed a licensing and collaborative agreement the HanXBiopharm for the development of ON 123300, a third generation inhibitor of CDK 4/6, and ARK5. Onconova received a non-dillutibe upfront payment from HanX, and is eligible to receive milestone payments and royalties on net sales. 

Also recently, ONTX completed a licensing agreement with Pint Pharma for the commercialization of rigosertib in Latin America. Under the terms of this deal, Pint will purchase up to $2.5 million of ONTX shares at a premium to the market, and will also be eligible for up to $43 million in milestone payments, along with tiered royalties.

Earlier in the year, ONTX entered into a coopoerative research and development agreement (CRADA) with the NCI. Under the agreement, the NCI will investigate a role for rigosertib in pediatric cancer associated with RASopathies. These licensing and collaborative agreement provide ONTX with near, and possible longer term funding, as well as advancement of drug candidates. 

In February, ONTX raised gross proceeds of $10mm in the sale of company shares at $1.01 per share. 

Overall, I think this is an interesting speculation which will not require years to wait out, and which posesses much greater upside than downside, assuming they execute. Put another way, at a $6mm EV (granted the EV is expanding rather quickly as they spend on trials), I like the odds of buying ONTX which has a viable Phase III asset, Phase II asset, and various other candidates in the pipeline. That said, my eyes are wide open, as even the greatest investors in this arena such as Baker Brothers or Perceptive have the occasional "zero" which they thought would be a "hero."

Catalyst

Trial enrollments, data, and more partnerships.