Last week, we initiated a position in Springworks Therapeutics (NASDAQ: SWTX), and as promised, we’re providing our view on the company.

Summary: Founded in 2017, Springworks is a $1.4B market cap biotech company developing targeted oncology therapies for rare tumor types with high unmet need. We like Springworks for several key reasons:

• The company has two late-stage (Phase 2/3) programs, nirogacestat and mirdametinib, targeting rare tumor types with high unmet need (either insufficient therapies or no available therapies). Past trial data gives us confidence in their chances of approval, and we expect these candidates to be approved in 2022 and 2023 respectively, upon which they will become first-in-class drugs in their respective indications through their differentiated clinical profiles.
• Springworks has signed collaborations with major biotech companies to develop several interesting early stage assets in additional oncology indications, providing a degree of validation of Springworks’ assets and creating a future growth runway.
• We anticipate several value-creating milestones over the next year, namely topline data from nirogacestat’s registrational Phase 3 trial in mid-2021 and an interim update from mirdametinib’s registrational Phase 2b in 1Q21.
• Our DCF analysis assigns Springworks a price target of $55, assuming an 85% probability of success for nirogacestat and mirdametinib in their main indications, and using an 11% discount rate and 2% terminal growth rate.

Company Background: Springworks was established in 2017 as a spinoff from Pfizer, which provided the company with initial funding and the development rights to its 4 clinical assets. Springworks raised ~$230M from investors including Bain Capital and OrbiMed Advisors before going public in September 2019.

1. Late-stage Clinical Programs in Areas of High Unmet Need: Springworks has two late stage programs currently in registrational or potentially registrational trials:

Nirogacestat. Nirogacestat is an oral, selective gamma secretase inhibitor developed to treat desmoid tumors.

• Desmoid tumors. Desmoid tumors are highly morbid, soft tissue tumors with an estimated 6,000 patients being treated in the US every year.
• Unmet need. Though survival rates for desmoid tumors are relatively high compared to other cancer types, desmoid tumors place a heavy burden on patients’ quality of life; they can interfere with the function of nearby structures (e.g. intestines), are painful to live with, and highly disfiguring. Treatment has traditionally been via surgical resection, but this method has been associated with recurrence rates of up to 70%. Chemotherapy and other targeted cancer therapies have been used off-label as well, but these have shown inconsistent efficacy and unfavorable safety profiles.
• Nirogacestat has received FDA breakthrough and orphan drug designation.

Mirdametinib. Mirdametinib is an oral, selective MEK inhibitor developed to treat NF1-associate plexiform neurofibromas (NF1-PN).

• NF1-PN. The NF1 gene produces neurofibromin, a protein that represses a key signaling pathway (RAS/MAPK) responsible for the growth of many cancers. When the NF1 gene is mutated, the loss of neurofibromin production allows this pathway to run unchecked, resulting in tumor growth across the body. There are ~100k NF1 patients in the US, and 30-50% of these patients can develop plexiform neurofibromas, which are tumors that grow along nerves.
• Unmet need. NF1-PN are associated with extreme pain and disfigurement as well as interference with neurocognitive function. First-line therapy is usually surgical resection, but NF1-PN extensive growth patterns along nerves make them hard to completely remove (while risking nerve damage).
• There is one approved MEK inhibitor for NF1-PN, AstaZeneca’s selumetinib, which was approved in April 2020. While the drug works, mirdametinib has demonstrated a potentially superior safety profile vs. selumetinib, which should allow patients to remain on therapy longer and experience more clinical benefit.
• Mirdametinib has received FDA orphan drug designation.

2. Promising Clinical Data.

Nirogacestat. To date, nirogacestat has shown a promising clinical profile in its Phase 1 and 2 trials. The drug is currently enrolling patients in its Phase 3 trial, with progression free survival (PFS, a measure of how long patients live without their tumors growing >20% in size) as the primary endpoint.

• Phase 1. Nirogacestat achieved an objective response rate (ORR) of 71.4% in its 7-patient Phase 1 trial (5/7), and a 100% disease control rate (DCR). Patients were able to stay on the drug for a median of 49.5 months (at the time of publication, so possibly longer), and none went off treatment due to safety issues.
• Phase 2. In a heavily pre-treated population (median 4 lines of prior therapy vs. 3 in Phase 1 i.e. sicker patients), nirogacestat again achieved a 100% DCR and a 29.4% ORR. More importantly, 59% of patients remained on drug for more than 2 years. The drug was well tolerated with only 1 patient discontinuing treatment due to side effects.
• Phase 3. A 115-patient Phase 3 trial is currently enrolling patients. The trial is powered to show a 12-month difference in PFS vs. placebo, and past trials from a similar drug showed that 50% of placebo patients experience disease progression by 8 months, which compares favorably to what nirogacestat has demonstrated in its Phase 1/2 trials.
• The Phase 3 trial is expected to readout in 2Q/3Q21 and we expect approval of nirogacestat in 2022.

Mirdametinib.

• Phase 2. In its Phase 2 trial, Mirdametinib demonstrated a 42% ORR in 8/19 patients. In contrast, selumetinib demonstrated a 74% ORR in its Phase 2 trial. Though selumetinib’s Phase 2 data was numerically superior to mirdametinib’s, we believe several factors artificially limited mirdametinib’s efficacy:
  • Selumetinib’s trial enrolled only children while mirdametinib’s trial included only patients 16 years or older. Tumors in younger children are considered to be more responsive to therapy than those in adults.
  • Patients in the mirdametinib trial were removed from the trial if they did not show signs of benefit within 12 months, which may have limited the number responses; 30% of selumetinib’s patients did not respond until after 12 months on drug.
• Safety benefits. In its Phase 2, only 5 out of 19 patients (26%) required dose reductions of mirdametinib. In contrast, in selumetinib’s Phase 1, 10 out of 24 patients (42%) required dose reductions due to toxicity issues. We believe that this is evidence that mirdametinib is a safer drug than selumetinib, which will be an important differentiating factor for doctors deciding between the two drugs.
• Phase 2b. Springworks is currently enrolling patients for a 100-patient Phase 2b trial of mirdametinib (primary endpoint ORR) that could support approval in 2023. The trial will enroll an even split of pediatric and adult patients and will not remove patients before 12 months. We expect that mirdametinib will show a similar ORR to selumetinib and differentiate itself via a superior safety profile.

3. Intriguing Early Stage Programs.

• Nirogacestat for Multiple Myeloma Therapy. Nirogacestat is also being evaluated as an add-on therapy to BCMA therapies for multiple myeloma, a cancer of the plasma cells with ~27k patients in the US every year. These drugs target a protein called BCMA on the surface of cancer cells, and preclinical data has shown that nirogacestat significantly upregulates the expression of BCMA on cancer cells and enhanced the potency of BCMA-targeting drugs. Springworks has already signed collaborations with Glaxo Smith Kline and Allogene Therapeutics to use nirogacestat in combination trials with their BCMA drugs.
• BGB-3245. Springworks has also signed a collaboration agreement with Beigene, a leading China biotech company, to develop a novel cancer drug targeting BRAF-mutant solid tumors. BRAF is a validated oncology target that is clinically relevant in melanoma, lung cancer, and colorectal cancer. BGB-3245 has been shown in preclinical models to be effective in inhibiting certain mutant forms of BRAF that currently approved BRAF inhibitors cannot target. A Phase 1 trial for BGB-3245 has been initiated in Australia.

4. Strong Balance Sheet: As of the end of 2019, Springworks had ~$330M in cash and no debt. This is expected to be sufficient to fund operations and support its 6 clinical trials through the end of 2022. The company has not indicated that its clinical development timelines have been impacted by Covid, but we will be on the lookout for any future guidance.

5. Experienced Leadership: Springworks is led by a world-class management team with deep pharma industry experience. Selected leadership includes:

• Chief Executive Officer Saqib Islam is a founding member of the company and was formerly the Chief Business Officer at Moderna. Prior to Moderna, he held senior leadership roles at Alexion Pharmaceuticals (a $20B rare disease biotech).
• Chief Medical Officer Jens Renstrup was formerly Head of Medical Affairs at Alexion, where he was instrumental in building out its pipeline. Prior to Alexion, he led medical affairs at Glaxo Smith Kline’s vaccine division.
• Head of R&D Stephen Squinto is a venture partner at OrbiMed, a highly respected life science investment firm. He is also a co-founder of Alexion, where he led global operations and R&D for over 20 years.

6. Risks. Potential investors should be aware that Springworks is exposed to the following key risks as a biotech company:

• Clinical development risk. Springworks’ assets could fail their clinical trials due to unfavorable or uncompetitive clinical data and/or unexpected safety issues.
• Competitive risk. Springworks’ drugs could be leapfrogged by more effective drugs, severely limiting their commercial potential.
• Financial risk. Unexpected costs/circumstances could lead to the company running out of cash and having to raise dilutive capital and/or shut down.

Disclosure: We currently own shares of Springworks Therapeutics. This article expresses our own opinions, not Springworks’ or any other party’s opinion. We are not receiving compensation for this report. We do not have a business relationship with the company mentioned in this report.