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Topline Summary
Replimune Group, Inc. (NASDAQ:REPL) is an immunotherapy-focused biotech developing virus-based treatments for different solid tumors, most notably different forms of skin cancer. They had a pretty shattering negative data readout back in December, which might be a bit overblown. It’s definitely hypothesis-generating, at least, but it might be too much for a market that has seen almost nothing but failure come out of oncolytic viruses over the years. This could be an opportunity, but overall I see a bit more risk than reward for the near term.
Pipeline Overview
RP1
The project furthest along for REPL is RP1, a virus designed to both directly kill tumor cells and induce an immune response against other tumor cells. The company has completed a pair of phase 1/2 studies for this approach in skin cancer, one in cutaneous squamous cell carcinoma (the CERPASS study) and another in melanoma (the IGNYTE study).
Initial findings from the CERPASS study were shared last December. Adding RP1 to the current standard of care agent cemiplimab did not improve the overall response rate or the complete response rate compared with cemiplimab alone. There was a trend favoring RP1 in terms of complete response rate (38.1% vs. 25%), but this did not meet the prespecified threshold for statistical significance.
The signal for improved complete response rate appeared to be a little stronger in patients with “locally advanced” (ie, not metastatic) disease, and patients in the RP1 arm had apparently longer duration of response. The press release suggested that one cause for the failure of the trial was an imbalance in the proportion of patients with high tumor burden who underwent treatment with RP1.
In essence, REPL is positing that this early readout may not be positive because patients in the RP1 plus cemiplimab arm were worse off to begin with, by one metric, at least.
In the same press release, REPL provided an update of the findings from IGNYTE in the cohort of patients with melanoma who failed prior treatment with an anti-PD1 agent. Giving RP1 plus nivolumab led to an overall response rate of 31.4%, with around half of the patients deriving some clinical benefit from this treatment approach.
REPL intends to initiate a confirmatory study comparing RP1 plus nivolumab against the physician’s choice in the PD1-refractory group of patients with melanoma, with the hope of securing an accelerated approval while that trial is being conducted.
RP2
RP2 is an evolution of RP1, using the same backbone and general approach but adding on an encoded anti-CTLA4 antibody to be expressed by cells and hopefully boosting the immune response even further.
So far, we’ve seen some initial results for RP2 in the setting of uveal melanoma, a form of the disease that starts in the eye and frequently metastasizes to the liver. An update of data presented at last year’s SMR meeting showed a response in 5 of 17 patients enrolled in a phase 2 study (4 of these responders were in the group of patients receiving RP2 in combination with nivolumab). The median duration of response was just over 11 months.
There’s not a lot to benchmark these data to, but it’s worth noting that the pivotal study for tebentafusp showed a 9% response rate. That’s frontline, though, and restricted to patients of a specific HLA type.
Based on the findings of this phase 2 trial, REPL has guided that they intend to initiate a registrational trial for RP2 in uveal melanoma, although the timeline is not yet clear.
Financial Overview
As of their most recent quarterly filing, REPL held $508 million in total current assets, including $76 million in cash and equivalents and $421 million in short-term investments. Their total operating expenses were $64 million, and after other income and expenses were factored in, the company realized a net loss of $60.2 million for the quarter.
At this cash burn rate, REPL has approximately 8-9 quarters of cash and assets on hand to fund operations.
Strengths and Risks
The first shot across the bow for me with a company like REPL is just how little headway we’ve made with tumor-killing viruses over the decades. When you have one approved therapy in that line after so much work (not to mention that this oncolytic virus, T-VEC, has failed to move the needle much after its initial approval), it starts to look a lot like these things just don’t work.
That aside, REPL has some interesting hypothesis-driving data coming out of the big negative trial that tanked the market valuation for the company. It’s not good that their trial oversight did not account for balancing the tumor burden, but it provides a potential explanation. Obviously, the FDA won’t accept the “but look at the issue in the trial!” excuse to approve their therapy, but it’s a good start for a more focused trial.
I think the market is having pangs of “oncolytic viruses just don’t work, and this result is just another failure in a long line of failures.” This risk of future trial failures is very real, but it also creates a glimmer of opportunity for those who are risk-tolerant.
Their balance sheet, meanwhile, is strong enough to move them through the near term, but even with half a billion in the coffers, they’ll be running into some trouble starting around early 2025. I see it as a risk, because there are no expected catalysts I can see that they would be able to use to raise funds from a position of strength.
Bottom Line Summary
The market’s pessimism on oncolytic viruses has been well-earned over the years, but REPL could possibly be setting itself up as a rare success, if and when they find the appropriate niche and get better trial oversight. I think there’s an opportunity for a good investment here, but not quite yet. I would watch and wait for a more stable time and look for a possible position, if you’re so inclined and willing to deal with the risk. For me, however, this is a solid “hold” for now, with a possible inflection point coming later this year if they can prolong their cash reserves and get a better runway.
