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Topline Summary
TriSalus Life Sciences (NASDAQ:TLSI) is a biotech focused on the development of novel therapies for cancer, particularly directed at the liver. And one of their first approvals was in a non-skin form of melanoma.
Huh?
Let’s take a step back and a look at TLSI, their approved product, and where they’re headed next. Overall, I think their prospects look more up than down, and in this article I try to justify why I think you should consider a buy at this market cap.
Pipeline Overview
TLSI is focused on capitalizing on the TriNav and PRVI systems, devices that can take advantage of the unique anatomies of the liver and pancreas, respectively, to deliver medications to tightly controlled areas within the organs. As such, the company’s primary disease targets are cancers that affect the liver and pancreas.
Obviously, this means potential applications for primary cancers (like hepatocellular carcinoma, biliary tract tumors, and pancreatic cancer) as well as metastases from other tumors like colorectal cancer and uveal melanoma.
Fun fact: uveal melanoma (yes, skin cancer of the eye) most frequently metastasize to the liver. Something like 90% of patients who die from uveal melanoma have liver metastases at the time of death, making this organ an important target for therapy.
One of the important challenges for treatment of solid tumors that TLSI highlights is the high pressure exerted by these tumors, which can essentially push out systemic therapies delivered by infusion. This can make delivering a therapeutic dose of treatment very challenging. TriNav uses flow pressure to overcome barriers imposed by tumor and tissue anatomy that can render cancer drugs ineffective. This can improve tumor uptake of different drugs while minimizing dosage to normal tissue.
The system was launched in 2020 and has been commercialized by the company ever since, and it’s the main source of their revenue (discussed in the Financial Overview). At this time it is used for angiographic procedures to deliver imaging media and therapeutic agents. It has been shown to improve delivery of agents used in procedures like TACE and TARE, which are standard treatments for patients with non-metastatic, but unresectable liver cancer.
SD-101
This “pressure-enabled drug delivery” method is what is enabling the rest of TLSI’s pipeline, which consists of a single immunotherapeutic agent called SD-101. This is an agonist of toll-like receptor 9 (TLR9), which has been hypothesized to help overcome immunosuppression induced by tumors and produce an antitumor immune response.
This agent, delivered by systems like TriNav (as well as an analogous version for the pancreas that was recently launched by TLSI), is being assessed for safety and efficacy in phase 1 trials for uveal melanoma liver metastases, hepatocellular carcinoma, intrahepatic cholangiocarcinoma, and locally advanced pancreatic cancer.
At SITC 2023, findings from the PERIO-01 study were updated in a late-breaking abstract. In patients with liver metastases from uveal melanoma, SD-101 treatment was well tolerated, either when given alone or in combination with systemic (ie, not delivered via TriNav) nivolumab.
There was also evidence of immunologic changes, including reduced Treg and MDSC populations in liver tumors, as well as markers of amplified markers of stimulated T cells. An encouraging rate of clearance of tumor ctDNA was observed in patients receiving SD-101 plus immune checkpoint inhibitors, which may correspond with improved overall survival in these patients. The median progression-free survival was 11.7 months, and the disease control rate was high, which the authors of the study postulated may be evidence that classical imaging criteria is underestimating the benefit of this therapy.
Also at SITC the company provided a first look at findings from PERIO-03, the locally advanced pancreatic cancer trial. Treatment was well tolerated, with no serious grade 3 or 4 adverse events. Again, signals of immune amplification in the tumor microenvironment were observed, but there were no formal efficacy findings to report just yet.
Financial Overview
As of their latest quarterly filing, TLSI held $29 million in total current assets, including $21.4 million in cash and equivalents. They had revenues of $5.2 million and gross profit of $4.6 million (a 43% year over year relative increase), while their operating expenses reached $18.5 million. Their net loss for the quarter was $1.3 million due mainly to a change in fair value of contingent earnout liability.
Putting aside the likely one-off accounting reports, TLSI likely holds cash necessary to fund operations for another 1-2 quarters. Research from the Maxim Group projects that annual revenues should reach above $30 million in 2024.
Strengths and Risks
TLSI presents a very unique and interesting case study, funneling a device approval into pipeline development. This helps to both provide a bedrock for the device itself within the interventional radiology community, in addition to helping support the financial structure of the company while they conduct the research.
Unfortunately, the finances are an issue that TLSI has not provided adequate guidance on, and even with growing revenues, they’re in a situation where they need to be seriously thinking about shoring up their cash reserves. Whether that will be from a position of strength is another question altogether. I think it’s going to likely be from dilution, representing a near-term risk for an investor today.
Another risk is the pipeline itself, which focuses on one compound. If this immunotherapy fails to improve outcomes (such failure being the case for most immunotherapies in these disease areas), then there’s nothing else in the pipeline to pivot toward. On one hand, they’re quite focused. On the other hand, they’re undiversified. So the risk is concentrated on the outcomes of an unproven entity.
That said, there could be something to this pressure-enabled drug delivery hypothesis, and if that can lead to improvements in the standard treatment of any of these cancers, then TLSI is currently sitting in the bargain basement. But it’s going to take a long time as the company is just ramping up phase 1 studies, and many, many things can go wrong in the meantime.
Bottom-Line Summary
At a market cap of nearly $250 million, TLSI sits in an awkward position of garnering some respect from the market (considering no drugs are past phase 1) while having a very high ceiling. The revenue stream they have in place is going to really help offset the increasing costs, as well, although it’s highly unlikely this will carry them to profitability.
Still, despite these risks, I think TLSI is worth a serious look and consideration of a buy at these levels, since they have a bird in the hand and others cooking. You must respect the risks, of course, since SD-101 could bomb like so many other “cool” immunotherapy projects, and they’re researching in therapeutic graveyards. But there’s also a real opportunity here, with relatively low downside risk thanks to that revenue stream.
