By John Vandermosten, CFA

TSX:HBP.TO | OTC:HBPCF

READ THE FULL HBP.TO RESEARCH REPORT

INITIATING COVERAGE

We are initiating coverage of Helix BioPharma Corp. (TSX:HBP.TO) (OTC:HBPCF) with a current valuation of CAD$2.00¹ per share. This present value is based on our estimates for continued development of L-DOS47 in phased trials and a 2026 global launch of L-DOS47 for non-small cell lung cancer (NSCLC) and pancreatic cancer in conjunction with partners. The clinical-stage company is developing its lead candidate, an enzyme conjugated to a monoclonal antibody (mAb) which can increase the pH of the tumor microenvironment (TME), to provide multiple beneficial effects against cancer. The construct is known as an antibody protein conjugate (APC) and is similar in composition to an antibody drug conjugate (ADC). The candidate is in Phase II studies for NSCLC and pancreatic cancer.

L-DOS47 links the enzyme urease to a mAb which can bind to a tumor marker appearing on lung and pancreatic cancer cells. When the mAb is bound to the tumor cell, the action of the linked enzyme is able to alter the pH of the TME by converting nearby urea into ammonia. The ammonia is cytotoxic to the tumor cells and causes a slight rise in the nearby pH potentially enhancing the efficacy of weak base chemotherapeutics. Preclinical work has also shown that the presence of L-DOS47 can reduce expression of the PD-L1 protein, enhancing the natural immune system’s ability to recognize cancerous cells. The biologic is being developed as therapy in combination with chemotherapy or other immunotherapy in both indications. This approach aims to act against the tumor from multiple directions, enhancing the tumor fighting effect of chemotherapeutics and the natural immune system. While first line therapy is effective in some cases, most patients require second line, which maintains a sizable market in both settings for the APC if eventually found effective and approved. The possibility also exists that the agent may be appropriate for both first and later line treatments in various circumstances.

Helix is conducting several Phase II trials. A combination chemotherapy trial for European and Asian markets and a monotherapy trial which has completed data collection and is now finalizing reports for non-small cell lung cancer (NSCLC). A Phase Ib/II pancreatic cancer trial was recently launched that is expected to read out in 2021.

On October 31, 2019, Helix held approximately $1.7 million in cash on its balance sheet following a $7.0 million capital raise. The availability of these funds has enabled Helix to launch its Phase Ib/II pancreatic cancer study with L-DOS47. However, additional funds will be required in the near term to continue research and development activities. The company currently holds no debt. We expect Helix to consume ~$600,000 in cash per month in 2020 as it advances its Phase II programs.

Based on our review, we anticipate that pivotal data will be available for indications NSCLC and pancreatic cancer by 2025. We expect a submission of a biologics license application (BLA) to regulatory authorities in the US and Europe and a response from the FDA and EMA over the 2025 to 2027 period with the first submission to the FDA in pancreatic cancer. Approval and commercialization are expected one year after submission based on historical precedents. If data from the trial demonstrate a major advance in treatment, Helix may receive a breakthrough or priority review designation, which would advance the drug more quickly through the application process. Pancreatic cancer is diagnosed in between 50 and 60 thousand persons per year which may qualify L-DOS47 for an Orphan Drug Designation.

Helix’ innovative approach to addressing cancer has several synergies with chemotherapeutics, can precisely deliver cancer cell cytotoxicity to target cells and may enhance the body’s immune response. We anticipate a near-term readout for the L-DOS47 monotherapy trial followed by interim readouts for the other studies in progress. The company needs a partner and continued financing to further advance L-DOS47 through 2020 and if data is supportive of continued work we anticipate a BLA submission and ultimate commercialization.

INVESTMENT THESIS

A substantial body of research has shown that the tumor microenvironment becomes acidic as cancerous cells favor metabolism via glycolysis. The high metabolic demand of tumor cells’ fermentation of glucose to lactic acid creates free H+ ions that lower the surrounding pH. As a result of low tissue perfusion due to defective vasculature the acidic environment is not thoroughly flushed with oxygenated blood. Cancer cells can adapt to survive in low pH environments through increased glycolytic activity and expression of proton transporters that normalize intracellular pH. However, the extracellular acidic tumor microenvironment has been shown to be immuno-suppressive. The lower pH inhibits T and natural killer (NK) cells and promotes myeloid derived suppressor cells and T regulatory cells. This lower pH not only increases immuno-suppression around the tumor but also can impact the effectiveness of cancer therapies such as checkpoint inhibitors and chemotherapy by producing an acidic shield around the TME.

To address this imbalance, Helix has designed an elegant solution designated L-DOS47 that conjugates a tumor protein specific monoclonal antibody (mAb) with a urease enzyme to convert nearby urea into ammonia and carbon dioxide. The mAb targets carcinoembryonic antigen-related cell adhesion molecule 6 (CEACAM6), which is expressed in numerous cancers, including NSCLC and pancreatic. The enzymatic reaction’s ammonia production is toxic to tumor cells and also has the effect of increasing the pH, potentially reversing immuno-suppressive effects and allowing weak-base chemotherapeutics to work better. Helix has initiated two Phase II trials and has just begun a Phase Ib/II in pancreatic cancer which are evaluating lead candidate L-DOS47.

L-DOS47’s unique mechanism of action which both raises pH and creates a toxic environment for cancer cells is particularly amenable to combination therapy. Weak base chemotherapeutics such as vinorelbine may show synergistic efficacy with L-DOS47. The candidate may also reduce PD-L1 expression on tumor cells thereby enhancing T cell effectiveness. Studies have shown that raising intratumoral pH can improve responses to checkpoint blockade inhibitor immunotherapy.

Current standard of care for non-small cell lung carcinoma (NSCLC) is dominated by surgery, radiation therapy and chemotherapy; however, targeted therapy and immunotherapy are also appropriate. There are ~228,000 new US cases of lung and bronchus cancer expected in 2019, second in incidence only to breast cancer. NSCLC makes up a large portion of this population and is a particularly attractive indication for Helix as there are many cases that can be addressed. If proven safe and effective, L-DOS47 would be a prime candidate for combination therapy with checkpoint inhibitors in first line therapy or with chemotherapy in second line therapy.

Pancreatic cancer is one of the most deadly cancers in large part due to the difficulty of early detection. Surgery radiation and chemotherapy may be appropriate for the disease when caught in its earlier stages; however, there are few effective treatments for most who are diagnosed with the disease. Pancreatic cancer makes up about 3% of all cancers which is equivalent to ~57,000 new cases per year in the United States. It is a desirable indication to pursue due to the lack of alternative therapies and the severe unmet need. The DOS47 platform may also be appropriate for other cancers.

We take a conservative approach and anticipate the drug to have similar pricing as immunotherapies and oncology biologics in the United States. We expect a discount to these levels in other markets such as Europe and Asia. We make reductions for regions ex-US to reflect relative prices in these economic areas.

While our target price is generated based on L-DOS47 success in NSCLC and pancreatic cancer, Helix has several other assets in its portfolio including V-DOS47 and a chimeric antigen receptor (CAR)-T cell candidate. We anticipate adding a valuation component for these programs as they advance to a more mature stage.

Key reasons to own Helix shares:

‣ Novel mechanism of action that is synergistic with other therapies

‣ CEACAM6 target is specific to tumor cells, especially lung and pancreatic adenocarcinoma

‣ L-DOS47 may reverse acidic extra-cellular conditions favorable to cancer cell survival

‣ L-DOS47 may improve uptake of weak-base chemotherapeutics

‣ L-DOS47 may reduce PD-1 and PD-L1 expression thereby improving immune response

‣ Favorable drug safety profile with no reported drug-related adverse events

‣ Biologic eligible for 12 years of exclusivity in United States and extended protection in other geographies

‣ North American rights to intellectual property

‣ Pursuing multiple indications

◦ Non small cell lung cancer

◦ Pancreatic cancer

In the following sections we review the oncology space and DOS47’s position in it with a discussion of ADCs and their relationship to Helix’ platform. We expect first sales in 2026 following favorable registrational data, the submission of a BLA and regulatory approval. We discuss the assumptions in our appraisal and generate a valuation of $2.00 per share. L-DOS47 may prove to be an excellent complement to chemotherapy and immunotherapy lending significant synergies through the precise mechanism of targeting and reducing the acidity in the tumor microenvironment.

Targeted Therapies for Treating Cancer

Antibody Drug Conjugates

Antibody drug conjugates (ADCs) are monoclonal antibodies (mAbs) chemically attached to a biologically active cytotoxic payload or drug. mAbs are very specific in their targeting and allow the linked payload to be delivered to the desired site thereby limiting off target effects. The precise nature of ADCs allows the use of more potent toxins that would be prohibitive if used systemically. An important component of the ADC is the chemical linker that matches the payload with the mAb. The linker is designed to be either cleavable or non-cleavable, which determines the properties of the drug delivery. The linker also controls the distribution and delivery of the payload to the desired cell and can be designed to deliver the drug over an extended period. In most cases, after binding to surface antigens, ADCs are endocytosed into the cell where they undergo lysosomal degradation and release of their concentrated cytotoxic payload. There are a limited number of cytotoxic payloads that are sufficiently stable to make it to the inside of a cell. The most common attachments include microtubule inhibitors, DNA synthesis inhibitors and topoisomerase inhibitors. If the linked drug has the desired effect, it will cause cell apoptosis and eradicate the cancer.

Helix has introduced a variation on the ADC and maintains the epitope specific mAb and chemical linker, but instead of using a toxic payload, attaches a urease enzyme to create toxic ammonia at the surface of the cancer cell. This is known as an antibody protein conjugate (APC) which functions similarly to an ADC. The L-DOS47 unit developed by Helix consists of a camelid antibody employing a non-cleavable chemical linker to a urease enzyme. A feature differentiating the two structures is that the APC is not internalized into the target cell to release its payload while the ADC is taken inside. L-DOS47 is considered an immunotherapy due to its mechanism of action, which reverses immune system suppression due to acidosis.

Immuno-oncology

Immuno-oncology (IO), or cancer immunotherapy is an approach to fighting cancer that uses the body’s own immune system to attack the disease. Normally, the body’s immune system can eliminate cancer cells, but in some cases, these cells can adapt to hide and proliferate. When IO drugs or biologics are administered, they allow the immune system to recognize harmful cells and destroy them, in many cases with fewer and shorter-lived side effects compared to surgery, chemotherapy and radiotherapy. Immunotherapy is preferred because it is frequently associated with fewer adverse events, maintains its potency, works well in conjunction with other therapies and is also able to better target the disease. Several classes of immunotherapy exist including therapeutic vaccines, checkpoint inhibitors, immune modulators, adoptive cell therapy (CAR-T), antibody drug conjugates and oncolytic viruses among others. Immunotherapy is commonly used and enhanced by other approaches such as chemotherapy and antibody drug conjugates². In recent years, many of the leading checkpoint inhibitors have advanced towards first line treatment of cancer, despite only working in a minority of cases. One of the goals of approved immunotherapies is to increase their effectiveness by combining with other drugs that enhance the ability of immune system to eradicate cancer.

L-DOS47

L-DOS47 is Helix’ first drug product candidate and has recently completed a Phase I/II monotherapy trial. The candidate is currently in a Phase I combination trial with carboplatin and pemetrexed in the United States and a Phase II combination trial with vinorelbine and cisplatin in Ukraine and Poland. The product was recently cleared by the FDA to launch a Phase Ib/II trial for advanced pancreatic cancer in the United States with enrollment and screening beginning in December 2019.

L-DOS47 is an antibody protein conjugate (APC) which provides benefits as compared to other therapies. The candidate makes use of a camelid single domain antibody designated AFAIKL2 that can identify specific antigenic sites on cancer cells and precisely deliver the enzyme to the desired site. L-DOS47 is a chemical conjugate of a recombinant single domain antibody and Jack bean urease which can link multiple antibodies per urease molecule. The urease enzyme is derived and purified from the jack-bean plant, which produces beans that can be consumed by humans and animals, although it can be toxic if consumed to excess. Urease is extracted from the seeds of the plant by using a complex refining process, then is conjugated with an antibody by a chemical linker. After completion of manufacture and administration, the AFAIKL2 antibody binds with the CEACAM6 antigenic site expressed on certain cancer cells.

Antibodies Linked to Urease Enzyme³

Corporate Milestones

Helix is conducting multiple Phase II trials and is expected to provide a readout of the L-DOS47 monotherapy study in the first half of 2020. Below we list key milestones that have occurred in the last year and anticipated future events.

‣ IND clearance by FDA for LDOS006 – August 2019 ($6.4 mm to complete study)

‣ Final clinical study report for LDOS001 – Calendar 1Q:20 (will cost $627,000)

‣ Finalized clinical reports for LDOS002 – Calendar 1Q:20

‣ Completion of first (non-randomized) portion of LDOS003 - Calendar 1Q:20

‣ Advancement of LDOS003 to Part II – Dependent on partnership

‣ Anticipated completion of LDOS006 – year-end 2021

‣ Availability of additional supply of L-DOS47 – Calendar 4Q:20 ($1.64 mm cost)

Conclusion

Helix has demonstrated early safety and efficacy in its lead candidate L-DOS47. The compound may enhance the efficacy of other cancer treatments using a novel mechanism of action that addresses acidosis. Please consult our initiation which provides additional detail regarding the targeted indications in NSCLC and pancreatic cancer, a review of preclinical and clinical work on L-DOS47 as well as a discussion of peers, risks and our valuation justification.

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1. Share prices, value references in the text and financial statement items are denominated in Canadian dollars.

2. https://www.pharmoutsourcing.com/Featured-Articles/358918-The-Evolving-Shape-of-the-ADC-Market-The-Widening-Application-of-ADCs-and-Manufacturing-Improvements-Meeting-Demand/

3. Source: Helix BioPharma Tumor Defence Breaker Video. http://www.helixbiopharma.com/