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Biotech with Solid Pipeline and 'Solid Partnership Outlook'
Research Report

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Analyst Kevin DeGeeter, with Ladenburg Thalmann, relayed the highlights from his recent meeting with this company's management team about near-term clinical news and pipeline plans.

Molecular Templates (MTEM:NASDAQ) continues to advance its pipeline and, thus, catalysts are anticipated next year, reported DeGeeter in an Oct. 24 research note.

The company is developing the next generation of immunotoxins, called engineered toxin bodies (ETBs), which could be the basis of novel drugs for cancer.

Early next year, Molecular Templates is expected to present its findings on additional patients treated with MT-3724, DeGeeter indicated. These individuals have diffuse large B-cell lymphoma (DLBCL) and will have received the Phase 2 dose of 75 microgram per kilogram. MT-3724, the company's lead product, which targets CD20+ B-cells, is in Phase 1b of development at this potential dose.

Ladenburg expects the data readout in Q1 or Q2/18. "Overall response rate data from up to 10 new patients are expected in H1/18; we view AACR as [the] most likely venue," wrote DeGeeter, referring to the annual meeting of the American Association for Cancer Research, to be held April 14-18, 2018.

Should those data reveal an overall response rate of 20% or better in relapsed/refractory DLBCL, the result "should support potentially pivotal, Phase 2 development in H2/18," DeGeeter stated. "We believe U.S. Food and Drug Administration approval in the relapsed/refractory setting may be possible based on a single 150–200 patient, Phase 2 study with a primary endpoint of overall response rate."

Looking longer term, regarding the use of MT-3724 on patients with this disease, DeGeeter projects "a peak sales potential of $190M," he wrote, "based on [a] $150,000 annual treatment cost and eight months on therapy."

Also, Molecular Templates is expected to advance its pipeline of second-generation ETBs in "1) CD38 (MT-4019) for multiple myeloma, 2) PD-1 for melanoma and 3) HER2 for breast cancer," and in this order, noted DeGeeter. The firm is expected to move all three programs into the clinic in 2018 and file the first investigational new drug application by midyear. This progress would be significant because, as DeGeeter noted, the company's "de-immunized, second-generation scaffold" is "the key to unlocking solid tumor market opportunity for [the] ETB platform."

The life sciences firm now has additional financial and staff support to expand its pipeline. "Following a reverse merger in August 2017, it has roughly doubled its team to 45 employees," DeGeeter said. "The firm expects cash on hand to fund each second-generation program through at least Phase 1 studies."

As for the viability of Molecular Template's ETB platform, it "will likely be attractive to pharmaceutical companies" because of its "novel mechanism of action," DeGeeter wrote. Partnerships with experts in antibody development are likely, the analyst stated, noting these could lead to faster pipeline development and, ultimately, "be an important contributor to both near-term news flow and long-term value creation for the company's shares."

Shares are currently trading at ~$8.89, whereas $10 is Ladenburg Thalmann's price target on the biotech, which is rated a Buy.

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