Arovella Therapeutics Ltd (ASX:ALA) recently reported promising data for the cytokine technology that enhances the performance of iNKT cells by prolonging their persistence and improving their anti-tumor activity.
Diamond Equity Research expects the achievement of milestones to positively reflect on the company’s valuation, with the initiation of the Phase I clinical trial to be a key inflection point.
The broker has updated its comparable company analysis resulting in a blended valuation of A$0.14 per share for Arovella, contingent on successful execution by the company.
The following is an extract from Diamond’s update note on Arovella:
- Arovella Therapeutics Optioned Cytokine Technology Shows Enhanced iNKT Cell Performance in Detailed Study - Arovella Therapeutics has reported promising data following its exclusive option to license a cytokine technology from the University of North Carolina Lineberger Comprehensive Cancer Center (UNC Lineberger). The results demonstrate that this cytokine technology enhances the performance of iNKT cells by prolonging their persistence and improving their anti-tumor activity. In a study of 16 mice with solid tumor xenografts, CAR-iNKT cells engineered to express a cytokine significantly extended the animals' lifespan and led to an approximately tenfold increase in circulating iNKT cells four weeks post-treatment. Specifically, the study shows 75% of mice treated with CAR-iNKT cells incorporating a cytokine survived until the end of the 61-day study, with none dying before 40 days. This is a stark contrast to CAR-iNKT treated mice without the cytokine, where all died within 49 days, and the untreated control group, which all died within 26 days. The positive data has triggered an Option fee of US$15k payable to UNC Lineberger, leading to ongoing discussions about a potential definitive license agreement, expected to be signed before the expiry of the Option term in March 2024. The integration of the cytokine technology might increase the effectiveness of Arovella's cancer-targeting technology across various cancer types, including solid tumors, providing a potentially significant advancement in iNKT cell drug development.
- Completion of A$4.1M Placement and A$2.2M Share Purchase Plan - Arovella has successfully secured the announced A$4.1 million placement from institutional and sophisticated investors, and A$2.2 million Share Purchase Plan (SPP) for eligible shareholders. The funds procured will be directed towards pushing Arovella’s primary product, ALA-101, towards Phase 1 clinical trials for patients with CD19-positive non-Hodgkin’s lymphoma. Additionally, these funds will fortify Arovella's iNKT cell therapy pipeline and offer general working capital.
- Q4 FY2023 Cash Flow and Valuation Update - During the final quarter of the financial year, Arovella used A$2 million in net cash for operating activities, slightly higher than A$1.83 million in the previous quarter. About 72% of this cash, or A$1.44 million, was spent on research and development, product manufacturing, and staffing costs. Furthermore, in an effort to strengthen its finances, the company raised approximately A$6.3 million in June and July. This was achieved through a $4.1 million placement to institutional and sophisticated investors and a A$2.2 million Share Purchase Plan (SPP) for eligible shareholders. Following the successful completion of the SPP in July, Arovella reported a pro-forma cash balance of A$7.38 million. In the subsequent 18 months, Arovella aims to reach several key milestones, including generating initial animal data on ALA-101 in combination with Imugene’s onCARlytics, optimizing its CAR-iNKT manufacturing process for phase I clinical trials, completing non-clinical safety and efficacy studies, and securing an Investigational New Drug (IND) application with the FDA. The company anticipates the commencement of Phase I clinical trial in non-Hodgkin’s lymphoma in H2 CY24. We expect the achievement of milestones to positively reflect on the company’s valuation, with the initiation of the Phase I clinical trial to be a key inflection point. We have updated our valuation methodology to reflect the latest cash balance and increase in share count. Additionally, we have updated the comparable company analysis resulting in a blended valuation of A$0.14 per-share contingent on successful execution by the company.