Very significant valuation arbitrage

I'll stipulate that virtually all cancer vaccines have failed. For that reason, this company is effectively unfinanceable by biotech specialized VCs or crossover hedge funds until and unless the clinical data from the Phase 2 study shows efficacy (no sane partner making a base salary of $400K per year would risk their career investing pre Phase 2 data). This absence of "smart money" creates a very significant valuation arbitrage. The company is also thinly traded and essentially illiquid.

I'll break this analysis down into a couple of themes: Antigen selection, Adjuvant, KRAS mutants (or for future products BRAF or P53), T-cell biology, immunization schedule, published clinical data. 

• Clinical Data: What first caught my attention was the survival data presented in December 2024 at a cancer conference.  In 20 pancreatic and 5 CRC cancer patients; the disease-free survival was 19.7 months - which is significantly longer than the 5-6 months expected in patients with evidence of minimal residual disease (MRD).
  • It's noteworthy that all patients enrolled in the Phase I had positive circulating tumor DNA of KRAS mutations - in other words, the worst of the worst clinical scenario. Positive mutations, and evidence of active tumors = quick death.
  • I ran a Monte Carlo simulation on the clinical data compared to expected disease-free survival from the literature of MRD+ pts and the probability that the Phase 1 clinical result occurred by random chance was 3/10 of 1%. In other words a real clinical trial efficacy signal (at least a 99.7% chance of it being real). 
  • In addition, patients who lived longest had the most vigorous KRAS specific effector T-cell response as evidenced by specific clones and lack of T-cell exhaustion (the T-cells produced granzyme and perforin and TH1 cytokines - an important hint)
  • Furthermore, the sponsor obtained this clinical result with a suboptimal dose of both adjuvant and peptide (only 2 KRAS peptides were used in Phase 1 instead of all 7 mutations that are now included in the ongoing Phase 2 Amplify-7P trial). And the Phase I study involved dose escalation of the adjuvant (a portion of the phase I patients had suboptimally lower doses of adjuvant). Since all adjuvant doses were found safe, the company selected and advanced the highest tested dose into the Phase 2 study.

• Antigens:
  • All of the 7 KRAS mutants (and also P53 and V600E and V600K for other products in their platform pipeline) are "public antigens", meaning the T-cell clones responsive to the antigens have not been centrally deleted through central tolerance in the thymus (this is an esoteric point but significant - if you don't have a PhD in immunology - you can copy this entire post into in Gemini or ChatGPT and have it explain it to you in simpler terms).
  • Each of the 7 KRAS peptides are 22 amino acids in length so that they encompass the mutation. The 22 aa length peptides (very clever) are much longer than typical 9 aa or 11 aa peptides that bind to the minor cleft of the HLA molecules (class I and II ) thus ensuring that virtually all permutations of the 7 known KRAS mutations will fit into one more HLA haplotypes. This is evidenced clinically in that effectively all (99%) haplotypes can present the peptides. This makes the vaccine universal for use in all patients with known KRAS mutant tumors (ie the products will address very big markets). 
  • But... those naive T-cells are very rare and have a extremely low probability of being presented with antigens with proper antigen presentation cell (APC) stimulation signals. Therefore a major challenge in developing effective vaccine immunity is to reach, stimulate and expand the clonotypes with high affinity receptors. It won't happen in the tumor microenvironment, nor will it happen in circulation, nor without some TH1 biasing stimulant - enter the adjuvant. 
• Adjuvant:
  • It's important to note that throughout the majority of vaccine history (predominantly infectious disease) vaccines have been delivered by intramuscular injection - which quite frankly is suboptimal - but works well enough with infectious agents like virus particles and bacterial components because they are 1) readily recognized as non-self and are 2) inherently immunogenic (meaning the microbial junk actually stimulates the immune system directly through multiple pathways, complement, APCs, Toll like receptors and IgMs etc).
  • Given historical precedent - most failed cancer vaccine attempts have also been delivered intramuscularly. The problem with the intramuscular route is that most of the peptide material (or mRNA) is absorbed into the bloodstream and rapidly degraded by proteases and nucleases cleared in the liver and therefore does not reach the immunologic compartments where T-cells reside (Key point: this is why the company speaks of targeting lymph nodes, which they effectively achieve where others have failed). 

The challenge ELTX is overcoming is a "probability density function" - ie the extremely low probability that the peptide tumor antigen of interest 1) encounters a naive cognate T-cell, 2) that the T-cell is MHC engaged with proper costimulation by an APC 3) that it drives it towards an effector phenotype, 4) that the clone expands in a significant and clinically meaningful magnitude, 5) the T-cell clone does not become exhausted and 6) that T-cell memory is formed for durable responses, 7) that those trained T-cells can traffic to the target tumor tissue. (immunologic data from both Phase I and II disclosed thus far show that all of these immunologic factors have occurred, and they correlate to overall survival in the Phase I data set)

• AMP-7P adjuvant is very cleverly designed and... administered.
  • Let's take the administration first because it is extremely important temporally and by route of administration and location. 
    • 1) The vaccine is subcutaneously administered (not intramuscularly) in 4 quadrants each shoulder and each hip. Doing so maximizes exposure of the immunogen to the maximal number of T-cells in as many different lymph nodes as possible - which increases the probability of exposure to potentially responsive T-cells. 
  • The adjuvant has an albumin binding lipid that attaches the peptide payload to albumin - a protein so large that it cannot traverse into blood vessels, rather it remains in the lymphatic compartment and drains into proximal draining lymph nodes.
    • The use of albumin binding protein also enables the company to also use a lower dose of the TLR9 agonist that avoids dose limiting side effects that occur when systemically administered (Pfizer learned this the hard way years back - see company's patent applications for background).
  • Binding to albumin also increases the half-life of the adjuvant to 14 days - which encompass many cycles of T-cell clonal expansion in lymph nodes.
    • Albumin (being abundant and a thermodynamically expensive protein for the body to synthesize) is recycled through a salvage pathway in which it is receptor internalized into an APC. Once in the lysosome, the phosphodiester linker is cleaved through acid hydrolysis and the KRAS peptides liberated, processed (chopped down to the 9-11 aa peptides that fit into HLA proteins) and endosomal trafficked and presentation to both Class I and II molecules
    • The route of admin and carrier increases the time interval and dose over which the peptide antigens can be presented to rare naive but potentially responsive T-cells. 
  • TLR9 adjuvant is an extremely potent driver a TH1 phenotype effector T-cell response by stimulating macrophages and dendritic cells (tricks the APCs into 'thinking' its responding to viral DNA so that the immune system generates a cytotoxic response capable of killing tumor cells).

• Immunization Schedule: Arguably, this may be one of the most insightful features of the clinical program. In addition to 4 quadrant subcutaneous immunizations, they space the 10 doses out in time and frequency. Importantly after the priming series of 6 doses in the first 8 weeks there is then an 8-week long break before 4 more boosts - this is an extremely important feature of the trial design.
  • Doing so enables memory T-cell formation and prevents overstimulation that could result in T-cell exhaustion. (Key point: over stimulation without adequate APC costimulation of T-cells in the tumor microenvironment is why most tumor T-cells are not cytolytic against the tumor cells)
  • Published clinical data from both Phase I and II show 1) expansion of KRAS specific CD4 and CD8 cells, that are 2) granzyme and perforin positive (can kill), and 3) have a TH1 cytokine profile. (in other words, KRAS specific responsive and no exhaustion). 
• Antigen Spreading - 87% of the treated patients generated T-cells to personalized neoantigens - also a favorable signal of immune killing of tumor cells and a broader immune response against the cancer.

In conclusion, this company is onto something very significant in cancer therapy. Furthermore, because this vaccine approach *expands* the population of cognate T-cells that are responsive to cancer antigens - it would be highly synergistic with checkpoint inhibitor therapies. Therefore, it could be strategically valuable to a number of big pharma companies that have been trying to figure out how to convert non responsive (microsatellite stable) 'cold tumors' to checkpoint responsive 'immunologically hot tumors'. This is the the holy grail in the field of immuno-oncology.

If Elicio can stick the landing on their Phase II data then this company could be worth several billion dollars - and it's currently only valued at $150M. A fine example of valuation arbitrage.