Cardiff Oncology’s Onvansertib: A Speculative Buy With Promising Data (NASDAQ:CRDF)

Cardiff Oncology, Inc. (NASDAQ:CRDF) is a San Diego-based clinical-stage biotech focusing on developing innovative cancer treatments. CRDF’s leading drug candidate, Onvansertib, is a first-in-class oral Polo-like Kinase 1 [PLK1] inhibitor that interferes with cancer cell division and may hinder cancer growth. Onvansertib is an ongoing trial as a monotherapy in combination with SoC treatments for mCRC, mPDAC, SCLC, and TNBC. Early data suggests it’s efficient in overcoming resistance to other treatments, improving response rates, and progression-free survival outcomes, showcasing the potential of this oncology approach. So, despite the inherent biotech risks, I deem CRDF a good “speculative buy” for biotech investors in oncology.

Onvansertib and Oncology: Business Overview

Cardiff Oncology was founded in 1999 as Trovagene, Inc. and rebranded in 2020. It’s now based in San Diego and specializes in innovative cancer treatments. CRDF’s leading drug candidate, Onvansertib, is a first-in-class oral Polo-like Kinase 1 (PLK1) inhibitor that interferes with cancer cell division, thereby hindering cancer growth. It’s evaluated as monotherapy and in combination with standard-of-care [SoC] treatments for various difficult-to-treat cancers such as metastatic colorectal cancer [mCRC], metastatic pancreatic ductal adenocarcinoma [mPDAC], small cell lung cancer [SCLC], and triple-negative breast cancer [TNBC].

CRDF’s main value driver is Onvansertib, a first-in-class, oral Polo-like Kinase 1 [PLK1] inhibitor that combines with standard treatments for several kinds of cancers. PLK1 is a serine/threonine protein kinase essential for cell division, including mitosis, centrosome maturation, and mitotic spindle modulation. PLK1 may be overexpressed in cancer, producing malign cell proliferation. PLK1 inhibitors bind to the PLK1 enzyme and interfere with its activity, preventing the cancer cells’ mitosis and hindering cancer growth and survival.

CRDF’s ongoing trials on Onvansertib currently focus on evaluating it combined with chemotherapy or targeted therapies that are part of the SoC to enhance treatment efficacy. Such standard treatments may encounter resistance over time, and Onvansertib can enhance cancerous cells’ vulnerability to them, thereby increasing their effectiveness. Based on this underlying principle, Onvansertib can target cancer cells with specific mutations or abnormalities. As of 2024, Onvansertib is being evaluated in the following programs for difficult-to-treat cancers: 1) mCRC, 2) mPDAC, 3) SCLC, and 4) TNBC.

So far, CRDF’s leading program is Onvansertib, which has potential indications for mCRC. Specifically, the company has three trials for Onvansertib indicated for mCRC: 1) In phase 2 CRDF-004 trial in collaboration with Pfizer, the company is evaluating RAS-mutated as first-line or initial treatment combined with FOLFIRI/bev (bevacizumab) and FOLFOX/bev. Onvansertib as a 2) second-line treatment for RAS-mutated mCRC in combination with FOLFIRI/bev. Here, CRDF has completed phase 1b/2 and is planning its phase 3 trials.

Note that the tested in 3) phase 2 with FOLFIRI/bev as second-line treatment in another randomized trial called CRDF-003 ONSEMBLE. This enrollment for this trial was discontinued in August 2023 after the company agreed with the FDA to focus on first-line RAS-mutated mCRC. However, the trial had 23 enrolled patients who continued treatment per protocol. The results showed the drug’s efficacy in patients without a previous bevacizumab [bev] treatment. These yieldings validate the opportunity for the drug as a first-line therapy for RAS-mutated mCRC.

Furthermore, there are 2 Onvansertib trials on mPDAC: 1) As second-line treatment in combination with nanoliposomal irinotecan [Nal-IRI] and fluorouracil [leucovorin/5-FU], in phase 2. Secondly, as a 2) first-line therapy combined with Gemzar (gemcitabine)/Abraxane (paclitaxel), being developed in partnership with the OHSU Knight Cancer Institute in phase 2. Finally, Onvansertib’s TNBC phase 2 trial focuses on assessing it as a potential second-line therapy in combination with paclitaxel in collaboration with the Dana-Farber Cancer Institute.

Onvansertib’s Positive Trial Data and Partnerships

Furthermore, in CFDF’s most recent earnings call, executives highlighted the results of the different clinical trials for Onvansertib. No new approved treatments have been developed in the last twenty years for the first-line treatment of RAS-mutated mCRC, which presents around 50,000 new patients annually in the US. Onvansertib has been proven effective against RAS-mutated mCRC when added to SoC FOLFIRI and bevacizumab [bev] for patients with no previous treatment with bev. This combined treatment resulted in superior antitumor activity and decreased vascularization compared with monotherapy.

In phase 1b/2, the combined therapy with SoC (FOLFIRI and bevacizumab) showed a 31% partial or complete response rate and a median progression-free survival of 9.4 months. Bev-naive patients treated with onvansertib plus SoC had an objective response rate [ORR] of 73% compared to 19% in Bev-exposed patients, demonstrating the drug’s effectiveness in overcoming resistance to Bev. Therefore, onvansertib’s ability to overcome resistance to SoC treatments is supported by clinical data, which makes it a promising candidate for enhancing resistant cancer outcomes.

In fact, Onvansertib displayed robust anti-tumor action as monotherapy in cetuximab-sensitive and resistant patient-derived xenograft [PDX] models. When combined with therapy and cetuximab, Onvansertib showed enhanced efficacy. This positive data may lead to Onvansertib becoming a potential new SoC.

The company also mentioned they observed positive results of Onvansertib as a single agent for other types of difficult-to-treat cancers. However, the executives emphasized that the optimal approach is to apply the drug in combination with SoC treatments for mPDAC, SCLC, and TNBC. The synergistic effects of the combined therapies underscore the drug’s potential impact in oncology.

Finally, the CRDF-004 trial for RAS-mutated mCRC is part of the FDA’s Project Optimus, which aims to optimize dosing for oncology drugs. Successful dose confirmation of Onvansertib could accelerate a potential FDA approval, since it’s aligned with regulatory objectives. It’s also worth mentioning that CRDF has strategic partnerships with Pfizer, OHSU Knight Cancer Institute, UPMC, and Dana-Farber. As part of its agreement in 2021, Pfizer acquired 2.4 million CRDF shares at $6.22. The other partnership counterparts are institutions or entities interested in pushing forward this research due to its potential.

Microcap with Potential: Valuation Analysis

The company has a market cap of $162.3 million from a valuation perspective, making it a relatively small biotech stock. Moreover, according to Seeking Alpha’s dashboard on CRDF, the company is forecasted to generate almost no meaningful revenues compared to its size by 2025. However, it’s worth mentioning that as of Q1 2024, CRDF reported $67.2 million in cash and short-term investments against no debt other than some operating lease obligations. The company’s equity book value is worth $60.9 million.

Moreover, I estimate the company’s latest quarterly cash burn was roughly $7.8 million. I obtained this figure by adding its most recent quarterly CFOs and Net CAPEX. This implies a yearly cash burn rate of $31.2 million, which suggests a cash runway of approximately 2.1 years compared to its current liquidity. Such an estimate is somewhat higher than management’s cash runway forecast, lasting until Q3 2025. So, I imagine that CRDF plans to slightly increase its operating expenses in the coming quarters, probably after CRDF-004’s data release by 1H2024.

Therefore, I think the best way to price CRDF is through its P/B ratio because no meaningful revenues or earnings are expected in the near term. Currently, its P/B ratio is 2.7, which appears reasonable compared to its sector median P/B of 2.5. Additionally, the company has a potentially important catalyst coming up by mid-2024 and enough resources to maneuver and initiate a subsequent phase 3 trial if needed.

Lastly, I think Onvansertib’s prospects in mCRC are significant as it can potentially enhance the treatment of up to 40,000 patients if successfully developed and commercialized. Plus, this drug has additional possible revenue verticals on mPDAC, SCLC, and TNBC as well in the pipeline. While there are no concrete estimates for Onvansertib’s price if approved, 79% of new oncology drugs can cost more than $100.0 thousand per year. So even if Onvansertib tapped into just 10% of its target market, the revenue potential would be considerable relative to its current market cap. Hence, I think a speculative “buy” rating for CRDF makes sense.

Investment Caveats: Risk Analysis

The biggest risk I see with CRDF’s IP portfolio at this stage is that it needs to demonstrate with solid evidence that Onvansertib is highly beneficial. This is because its trials assume it’s combined with already established SoC. So, the added benefit has to be meaningful to achieve a competitive advantage over other alternative drugs that can enhance the current SoC. Naturally, there’s also the risk that the upcoming Phase 2 results and potential Phase 3 trials fail to achieve their endpoints and face substantial FDA setbacks.

Moreover, I think CRDF’s cash runway seems sufficient for now, but FDA approval processes take several years. Since CRDF’s trials are still in Phase 2, it’s reasonable to expect at least another 2 or 3 years for a potential FDA approval, assuming all goes according to plan. If there are setbacks, this could take even longer than that. Since CRDF’s management expects it to have enough resources until Q3 2025, I believe there’s a prospect of stock dilution in 2025. However, I think CRDF still trades at a relatively small market cap, so there’s undoubtedly a lot of room for future growth. Plus, tangible catalysts that could also help the price are coming up, so I’d argue these risks seem justified for now.

Speculative Buy: Conclusion

Overall, CRDF has a promising IP portfolio, particularly with Onvansertib for mCRC. Using back-of-the-envelope math, I think its peak sales could be substantial if successfully developed and commercialized, especially compared to its current market cap. Moreover, potential upcoming catalysts in 2024 add to this positive outlook. So, despite the inherent risks in biotech stocks, I believe CRDF could be a good “speculative buy” for some biotech investors looking for exposure in oncology.