Lisata Therapeutics Inc (NASDAQ:LSTA) finds itself in an extraordinary but not unusual position emblematic of the challenges faced by small-cap biotech companies over the past three years as they seek recognition in a market that has performed ‘a 180’ turn since the peak of Covid vaccines interest in the sector in 2021.
Risk capital has been sidelined during this politically and economically volatile period, not just in life sciences, but across microcap markets internationally. Still, for those would-be investors new to the Lisata story, this may offer the perfect time for an introduction.
For those channeling their inner Warren Buffett or Ben Graham will see the value equation here: The market isn’t even recognizing Lisata’s cash in the bank (US$43 million as of March 31) let alone its intrinsic worth.
Lisata’s technology could be a game changer for oncologists and patients alike as the company's scientists are hoping to pull off a world’s first in developing an optimized treatment for pancreatic cancer. This disease, which killed Steve Jobs and Patrick Swayze, is effectively a death sentence once diagnosed.
A potential game changer in pancreatic cancer treatment
Lisata’s lead asset, certepetide, is being developed to overcome two major challenges in treating solid tumors. First, the tumour stroma, the supportive tissue structure around a tumour, consisting mainly of the basement membrane, fibroblasts, immune cells, and vasculature. The tumour stroma acts to physically block treatments directed at the cancer. Certepetide not only manages to obviate this impediment, but it also actively turns the barrier into a conduit.
Moreover, certepetide helps tame the tumor microenvironment, removing another major barrier to existing treatments, while combating resistance and metastases (cancer spread) in the process. It has been developed to be co-administered or molecularly bound (tethered) to anti-cancer therapies, enhancing the efficacy of existing chemotherapies and other types of anti-cancer treatments.
Commercially, if the data read-out from the current Phase 2b study is as positive as the data reported for the Phase 1b/2a study, Lisata will have myriad deployment options and potential partnering opportunities. Researchers are also assessing its viability in glioma, a brain cancer that can also form in the spinal cord, along with several other solid tumour targets.
“We are not resting simply on a binary programme,” says David Mazzo, Lisata’s CEO. “We built, or I should say Kristen, our chief medical officer, and her team have built, a series of other programmes based on tumour types with different combinations of medication that could act as other shots on goal.”
The Kristen mentioned is Dr. Kristen Buck, an MD with more than two decades' experience in drug development and drug/device safety with companies and organizations including AstraZeneca and the US Food & Drug Administration (FDA).
Pathways to regulatory approval
Buck and her team have taken a strategic regulatory approach for certepetide in pancreatic cancer and gaining orphan drug designation for the asset in pancreatic cancer, brain cancer and bone cancer. This status brings incentives such as tax credits, marketing exclusivity, fee waivers, and grant eligibility to support clinical trials. The Lisata drug also has FDA rare paediatric disease designation for use in osteosarcoma, a malignant tumor in the bone.
The company’s ASCEND Phase 2b trial is underway in Australia to assess certepetide's potential efficacy. This is a double-blinded study of 158 patients receiving chemotherapies gemcitabine and nab‐paclitaxel with certepetide, or a placebo. The read-out is expected in the fourth quarter of this year, which means we are nearing a significant and seminal point for the technology and the company, says Mazzo.
Australia was chosen for the trial due to its effectiveness in conducting pancreatic cancer studies rapidly and in accordance with the International Conference of Harmonisation, meaning it follows the same rules on clinical evaluations as the US and Europe. Australia also offers incentives that will result in Lisata receiving between 43% and 48% of the clinical trial costs back as a rebate.
Furthermore, Lisata has already engaged with the Australian regulatory body, the Therapeutic Goods Administration, which has indicated that positive data would suffice for a provisional approval application. Discussions with the FDA and the European Medicines Agency (EMA) are planned between now and the end of the year.
End-of-phase 2 is typically when discussions turn to partnering with pharmaceutical companies that have the resources to complete the clinical evaluation process and bring the drug to market. Mazzo hints that conversations with traditional pharma have already occurred, with high interest and investment in evaluating the asset and conducting patent reviews.
Parallel to this, a Phase 2a clinical trial, BOLSTER, is being fast-tracked. It focuses on treating cholangiocarcinoma, a cancer in the slender tubes carrying digestive fluid bile. Recruitment was completed six months ahead of schedule, with early results expected in the first half of 2025.
Risk and reward
Lisata’s $43 million cash position provides a runway out to 2026, funding all development plans through to data. The company has also tapped into non-dilutive funding and boasts a partnership with China's Qilu Pharmaceutical, generating $15 million in milestones to date and potentially worth a further $221 million in staged payments and royalties.
Rationally, the cash alone should backstop a market capitalization well above the current $26 million. However, the micro-cap arena's fickle nature means all rational analysis seems to have been forgotten.
Always remember, this is a risk-reward scenario, not a risk-free investment. While the foregoing focuses on the stock's low fundamental value, one must also consider the ever-present risk of failure with small-cap biotech.