Carna Biosciences (Carna) researches and develops small molecule drug candidates to address unmet medical needs across several therapeutic areas including oncology, inflammatory diseases (rheumatoid arthritis), and neurodegenerative diseases (Alzheimer’s disease). The aim is to out-license its pipeline of drug candidates, including potential blockbuster drugs, to produce revenues by letting partners use its IP to commercialize certain drugs.
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Executive summary
Business overview
Carna Biosciences (Carna) researches and develops small molecule drug candidates to address critical unmet medical needs across several therapeutic areas including oncology and immune-mediated inflammatory diseases (rheumatoid arthritis). The aim is to out-license its pipeline of drug candidates, including potential blockbuster drugs with annual sales of over USD1.0bn, to produce revenues by letting partners use its IP to commercialize certain drugs.
The company specializes in drug discovery research focusing on kinases, an enzyme that regulates cell signaling. It recognizes that the dysregulations of cell signaling by certain kinases cause many diseases such as cancer and rheumatoid arthritis, and so conducts drug discovery research to develop a specific inhibitor drug to normalize abnormal cell signaling, targeting these aberrant kinases. Kinase inhibitor drugs have higher efficacy and fewer adverse effects compared with conventional drugs. Kinase inhibitor drugs have lower manufacturing costs and prompt fewer hospital visits than antibody drugs, another type of molecular targeted drug, because kinases are small molecules and chemically compoundable.
Many pharmaceutical and biotechnology companies engage in kinase inhibitor research. Yet Carna is the only one that conducts research on kinase inhibitor drugs, and in its Drug Discovery Support business it also manufactures and sells kinases—needed for kinase inhibitor research—and provides profiling and screening services investigating kinase inhibitor effectiveness to pharmaceutical companies and research institutions. It is the only company worldwide that manufactures and sells kinase proteins, while also researching kinase inhibitor drugs.
The company’s business model stands out in that it uses cash from the Drug Discovery Support, a business common among North American biotech companies but rare in Japan, to invest in the Drug Discovery and Development business (R&D). A manufacturer of kinase proteins, the company boasts a top-class lineup. Its key customers include many global companies, such as US-based Gilead Sciences, Inc. (NASDAQ:GILD) and Pfizer Inc. (NYSE:PFE). This customer base demonstrates the level of trust in the quality of the company's kinase proteins and in its profiling capabilities. Carna conducts research of kinase inhibitors based on its knowledge of kinases and its drug discovery technology.
On June 24, 2019, Carna entered a licensing agreement with Gilead Sciences concerning small molecule compounds Carna has in development as new immuno-oncology drugs. Carna has been engaged in a drug discovery program to develop lipid kinase inhibitors as next-generation immuno-oncology targets, and has chosen to license out to Gilead the exclusive rights to develop and commercialize this program worldwide. In connection with this agreement, Carna received an upfront payment of USD20mn (roughly JPY2.1bn) and is eligible to receive up to an additional USD450mn (around JPY47.2bn) in potential milestone payments upon achievement of certain development and commercial milestones. Carna also will receive royalties on future net sales of drugs developed via this program. Under the collaboration, Carna will support Gilead in its development endeavors by providing Gilead with exclusive access to Carna’s proprietary lipid kinase inhibitor drug discovery platform for a certain period. In December 2021, the company received the first milestone payment of JPY1.1bn after Gilead decided to proceed to the next development stage.
A feature of Carna’s out-licensing strategy is that the company grants global rights for its drug candidates instead of rights limited to specific regions such as Japan or Asia. Few Japanese biotech companies have succeeded in concluding global license agreements; the majority grant licenses limited to specific regions such as Japan, China, Korea, Taiwan, and the East Asian region. A key point is the company’s out-licensing agreements with North American companies such as Gilead. The financial terms seemed to be at least JPY10.0bn in total (upfront and milestone payments) according to Dr. Yoshino, CEO and President of Carna.
Administration of the BTK inhibitor AS-0871 to healthy adult subjects in a Phase I study began in August 2020, after regulatory authorities and the ethics committee in the Netherlands greenlit clinical trials of AS-0871 in February 2020. The Phase I clinical trial comprises a single ascending dose (SAD) and multiple ascending dose (MAD) study. Administration of AS-0871 in healthy adult participants in the SAD study was completed in 2020, and the safety and tolerability of the investigational drug were confirmed in all tested doses. Based on these results, in December 2021, the bioavailability* (BA) part of the MAD** study to evaluate the BA of a newly developed capsule formulation began. The company is also developing a new tablet formulation, which it plans to compare with the capsule formulation.
In February 2022, Carna entered into an out-licensing agreement with US-based Brickell Biotech, Inc. (NASDAQ: BBI), granting it exclusive global rights to develop and commercialize the company's novel STING antagonist. Under the terms of the agreement, the company will receive an upfront payment of USD2mn (JPY227mn) and milestone payments based on progress in development, approval filing, regulatory approval, and sales of up to USD258mn (roughly JPY28.3bn, converted at JPY110/USD). Carna is also eligible to receive tiered royalty payments after commercialization equivalent to mid-single digits to 10% of sales.
Trends and outlook
FY12/21 results: Carna reported full-year consolidated sales of JPY2.0bn (+78.0% YoY), an operating loss of JPY531mn (versus loss of JPY1.1bn in FY12/20), a recurring loss of JPY523mn (versus loss of JPY1.1bn), and a net loss attributable to owners of the parent of JPY534mn (versus net loss of JPY1.1bn). The loss per share came to JPY42.10, and the company did not pay a dividend in FY12/21. Sales rose sharply in the Drug Discovery and Development business due to the milestone payment from Gilead. Sales fell short of forecast in the Drug Discovery Support business due to sluggish domestic sales.
FY12/22 forecast: On May 10, 2022, the company revised upward its forecast for FY12/22 to reflect the March 2022 receipt of a JPY58mn milestone payment from BioNova Pharmaceuticals Limited (China), to which Carna granted the rights to develop and commercialize its BTK inhibitor AS-1763 in Greater China. The company now forecasts full-year consolidated sales of JPY1.2bn (-41.2% YoY), an operating loss of JPY1.7bn (operating loss of JPY531mn in FY12/21), a recurring loss of JPY1.7bn (versus loss of JPY523mn), a net loss attributable to owners of the parent of JPY1.7bn (versus loss of JPY534mn), and an EPS of -JPY128.46. By business segment, the company raised its sales forecast for Drug Discovery and Development to JPY286mn from JPY227mn but made no change to its forecast for Drug Discovery Support. It expects an upfront payment of JPY227mn in Drug Discovery and Development from novel STING antagonist out-licensing and sales of JPY900mn in Drug Discovery Support.
Strengths and weaknesses
Strengths: extensive knowledge and experience with kinase drug discovery, advanced technology that enables the company to discover drug candidates from scratch, and its established network with academia in Japan. Weaknesses: staff diverted away from Drug Discovery and Development, and few of its compounds having reached the clinical trial phase. (See glossary for explanation of terms.)
Key financial data
Note: Figures may differ from company data due to differences in rounding methods.
Recent updates
Issue of new shares for use in restricted stock compensation program
On April 21, 2022, Carna Biosciences, Inc. announced that it would be issuing new shares in connection with its restricted stock compensation program.
At the meeting of the company's board of directors held on April 21, 2022, the board voted to approve the issuance of new shares to be used in connection with its restricted stock compensation program. Approved by the board of directors back in February 2018, the company's restricted stock compensation program was put in place with the aim of further motivating its senior management team and key employees to constantly direct their efforts toward increasing the company's enterprise value, and better align their interests with the interest of the company's stockholders. At this latest meeting, the board voted to approve the allotment of a total of 42,900 common shares to meet the monetary compensation claims arising in connection with the restricted stock awards planned over the next three years for the four eligible directors and six key employees covered by the plan. The rights attached to the shares awarded under the program are the same as those attached to all other common shares, including voting rights and dividends. The contracts covering the restricted stock awards to the individual recipients lay out all the conditions of the awards, including conditions under which the restricted stock awards may be nullified or may be awarded without charge.
Licensee Gilead's announcement regarding DGKα inhibitor
On April 15, 2022, Carna Biosciences, Inc. made an announcement regarding Gilead's comments on the novel DGKα inhibitor out-licensed from the company.
On April 14, 2022 (local time), Gilead Sciences, Inc. (US) introduced the novel DGKα inhibitor (Gilead's development code: GS-9911) out-licensed from Carna in June 2019 as a new drug candidate compound with potential to become a first-in-class drug* at its IR event, Oncology Deep Dive. The company granted Gilead exclusive global rights to develop and commercialize its small molecule compound program in immuno-oncology targeting DGKα discovered by its drug discovery and development division.
In addition to an upfront payment of USD20mn (approximately JPY2.1bn), the company is entitled to receive up to USD450mn (approximately JPY47.2bn) from Gilead in milestone payments in accordance with the latter's development status and progress toward launch. In December 2021, the company received the first milestone payment of JPY1.1bn as Gilead decided to proceed to the next stage of development. The company said this development has no impact on its consolidated earnings forecast for FY12/22.
Poster presentation of BTK inhibitor AS-1763 at AACR 2022 Annual Meeting
On April 12, 2022, Carna Biosciences, Inc. announced the presentation of posters highlighting the BTK inhibitor AS-1763 at the American Association for Cancer Research (AACR) 2022 Annual Meeting.
Carna announced the presentation of two posters highlighting the drug discovery and results from the SAD part of its Phase 1 study of AS-1763, an investigational next-generation BTK inhibitor, on April 11, 2022 (local time) at the American Association for Cancer Research (AACR) 2022 Annual Meeting in New Orleans, Louisiana.
Structural optimization of a lead compound was performed to obtain AS-1763, a highly selective, orally bioavailable compound that strongly inhibits both wild-type and C481S-mutant BTK. The company is developing AS-1763 in the expectation that it will offer a new therapeutic option for patients with chronic lymphocytic leukemia (CLL) and other B cell malignancies who have developed side effects and acquired resistance during long-term administration of ibrutinib. The pharmacokinetics and pharmacodynamics data as well as favorable safety profile in healthy volunteers support a planned Phase 1b clinical study with AS-1763 tablet twice daily dosing in relapsed/refractory CLL and B-cell NHL.
Approval of IND application for AS-1763 (BN102) in China and receipt of milestone payment
On March 18, 2022, Carna Biosciences, Inc. announced the approval of the IND application for AS-1763 (BN102) in China and the receipt of a milestone payment.
The company announced that Chinese company BioNova Pharmaceuticals, to which it had out-licensed AS-1763 (BioNova's development code: BN102), had received approval from the National Medical Products Administration (NMPA) of China to commence clinical trials following the submission of an Investigational New Drug (IND) application. As a result of the approval, BioNova can conduct clinical trials in China of BN102 in patients with chronic lymphocytic leukemia (CLL), small lymphocytic lymphoma (SLL), and B-cell non-Hodgkin's lymphoma.
In March 2020, the company entered into an out-licensing agreement with BioNova, granting the latter rights to develop and commercialize AS-1763 (BN102) in Greater China. As a result of the IND approval, the company will receive a milestone payment of USD500,000 from BioNova. The company will book the milestone payment in Q1 FY12/22, but has not factored it into its full-year FY12/22 forecast, which was announced on February 10, 2022.
AS-1763, discovered by Carna, is a highly selective and potent Bruton's tyrosine kinase (BTK) inhibitor. The company has retained global rights to AS-1763 excluding Greater China and is conducting a Phase I clinical trial in the Netherlands. In 2H FY12/22, the company plans to commence a Phase Ib clinical trial of the drug in patients with CLL and B-cell lymphoma in the US after submitting an IND application to the FDA in Q2.
Business plan and growth potential
On February 10, 2022, Carna Biosciences, Inc. announced its business plan and growth potential.
Trends and outlook
Quarterly trends and results
Note: Figures may differ from company data due to differences in rounding methods.
Note: Figures may differ from company data due to differences in rounding methods.
Note: Figures may differ from company data due to differences in rounding methods.
Q1 FY12/22 results (out May 10, 2022)
Q1 FY12/22 (January–March 2022) results
In the Drug Discovery and Development business, in February 2022 Carna received an upfront payment of JPY227mn upon entering into a licensing agreement with Brickell Biotech regarding the rights to its novel STING antagonist, and in March it received a JPY58mn milestone payment from BioNova Pharmaceuticals Limited (China). In the Drug Discovery Support business, sales of proprietary kinase proteins were brisk in North America and China.
Gross profit increased thanks to strong performance by the Drug Discovery Support business and the booking of sales at the Drug Discovery and Development business. Consequently, both operating and recurring profit moved into the black. The company booked a net loss owing to the booking of impairment charges on research equipment as an extraordinary loss, however the scale of losses narrowed YoY.
Drug Discovery and Development
In Q1 FY12/22, in February the company received an upfront payment of JPY227mn upon entering into a licensing agreement with Brickell Biotech regarding the rights to its novel STING antagonist, and in March it received a JPY58mn milestone payment from BioNova after the latter received approval in China to commence clinical trials following the submission of an Investigational New Drug (IND) application. The company booked an operating loss owing to active investment in R&D, mainly in clinical studies, but the scale of losses narrowed.
Drug Discovery Support
Carna recorded sales of JPY268mn, driven by sales of kinase proteins and increases in sales from assay development services, profiling/screening services, and cell-based assay services. Sales of high-margin kinase proteins were brisk in North America and China.
In June 2019, Carna out-licensed exclusive global rights to develop and commercialize its immuno-oncology drug discovery program to Gilead, granting Gilead access to fundamental technology related to Carna’s proprietary lipid kinase inhibitor for a predetermined period of time. Sales arising from this agreement are included in segment sales. The breakdown of sales by region was as follows.
Full-year FY12/22 company forecast
Note: Figures may differ from those provided in company materials due to differences in rounding methods.
On May 10, 2022, the company revised upward its forecast for FY12/22 to reflect the March 2022 receipt of a JPY58mn milestone payment from BioNova Pharmaceuticals Limited (China), to which Carna granted the rights to develop and commercialize its BTK inhibitor AS-1763 in Greater China.
Full-year FY12/22 forecast (announced May 10, 2022)
Carna has no sales or R&D operations in either Russia or Ukraine. While the company says there has been no direct impact from Russia’s invasion of Ukraine, exports to Europe have been affected by unstable logistics in the region. With China imposing movement restrictions owing to renewed growth in COVID-19 infections, shipments have been affected since April. Orders from customers and distributors in Europe and China remain firm, and the company is taking various measures (such as changing transportation modes and routes) to minimize the impact on sales in Q2 onward.
Drug Discovery and Development
For FY12/22, the company forecasts Drug Discovery and Development sales of JPY286mn from milestone and upfront payments. The forecast includes an upfront payment from US-based Brickell Biotech for a contract concluded in February 2022 for the company’s STING antagonist, and the March receipt of a milestone payment from BioNova. The company forecasts R&D expenses in the segment at JPY2.0bn (+18.7% YoY), with plans to invest heavily in clinical trials for BTK inhibitors (AS-0871 and AS-1763) and CDC7 inhibitor (AS-0141).
Pipeline status
AS-0871 (BTK inhibitor)
The company initiated the single ascending dose (SAD) part of a Phase I study in healthy adults in the Netherlands in August 2020 and completed the trial in December 2020. It received results for the study on July 9, 2021, reporting that AS-0871 demonstrated safety and tolerability at all dose levels as well as a favorable pharmacokinetic profile. In addition, blood samples were taken to conduct a preliminary investigation into the extent to which AS-0871 suppressed inflammation and immunity. Based on the results of this research, the company announced that oral administration of the drug demonstrated an inhibitory effect that is expected to prove useful as a treatment for inflammatory and immune disorders.
Drawing from these findings, the company began the bioavailability (BA) portion of its multiple ascending dose (MAD) study in December 2021 using the newly developed capsule formulation of AS-0871. The company is also developing a tablet formulation of the drug, and intends to compare the BA of the tablet and capsule formulations. Carna plans to launch full-scale licensing activities for AS-0871 once it has obtained data from all three portions* of the MAD trial (BA, MAD, and SPT studies).
AS-1763 (BTK inhibitor)
Carna completed preclinical studies in 2020 and submitted a clinical trial application (CTA) to the regulatory authorities in the Netherlands in January 2021. The Dutch authorities completed their review of the company’s CTA, and on February 18, 2021, an ethics committee approved corresponding clinical trial protocols. Having received this approval, the company started the single ascending dose (SAD) portion of its Phase I clinical trial using healthy adult subjects in the Netherlands in April 2021, and completed administration of all corresponding doses to a total of 56 subjects in July 2021. Through this portion of the trial, the company confirmed the safety and tolerability of AS-1763 and found its pharmacokinetic profile to be favorable. In December 2021, Carna launched the BA part of the Phase I study using a new formulation. The company plans to use the results of the study as a basis for a Phase Ib multiple ascending dose study in the US from 2022 in patients with chronic lymphocytic leukemia and B cell lymphoma. The company held a pre-IND (Investigational New Drug application) meeting with the FDA, and based on the advice received, it filed the IND necessary to commence clinical trials.
The company hopes to expedite the study by using data from trials conducted in China by licensee BioNova Pharmaceuticals (Shanghai) Ltd. (not listed), which holds the development and marketing rights for Greater China. In January 2022, BioNova filed an IND application with China’s National Medical Products Administration (NMPA) with a view to conducting clinical trials in China, and in March Carna received a milestone payment upon approval. Carna is poised to receive up to USD205mn (about JPY21.5bn) from BioNova as development of AS-1763 hits various milestones in Greater China. In addition, it will receive up to double-digit tiered royalty payments on AS-1763 sales in Greater China.
AS-0141 (CDC7 inhibitor)
Carna submitted a clinical trial notification to the Pharmaceuticals and Medical Devices Agency (PMDA) for a Phase I clinical study of AS-0141 in patients with solid cancer to be conducted in Japan, and the PMDA completed its review in February 2021. In June 2021 the company initiated a Phase I study in patients with unresectable, advanced, recurrent, or metastatic solid tumors, comprising a dose escalation part and a dose expansion part. Objectives of the study include assessing the safety and maximum tolerable dose of AS-0141, as well as determining a recommended Phase II clinical trial dose. According to Carna, no dose-limiting toxicity (DLT) has been observed so far, which has allowed dose escalation to Cohort 5 (dose level 5, 250mg BID).
Drug Discovery Support
For FY12/22, the company aims to maintain steady segment sales, which it projects at JPY900mn. It forecasts stable profit despite expenses involved in developing new products and services. At the regional level, the company focus is on North America, which has prospects for ongoing sales growth in the medium term due to the size of the market and the constant emergence of new biotechnology companies, and Japan, where it aims to maintain and expand sales. The company also aims to expand sales in China, which is growing rapidly. Regional sales forecasts are as follows.
The segment sales forecast includes sales generated for a set period in connection with the exclusive access granted to Gilead of Carna’s proprietary lipid kinase inhibitors discovery platform. In North America, in addition to sales from Gilead, the company anticipates a growing flow of kinase and NanoBRET™ orders from start-up biotech companies.
The company plans to strengthen its lineup of functional kinase protein products, such as biotinylated kinase proteins that only it sells, as well as mutant kinase proteins. The company also plans to add additional target kinases to expand its service using NanoBRET™ technology (from Promega Corporation) for intracellular evaluation of the effectiveness of kinase inhibitors. Recognizing that most of its clients are involved in cancer research, the company looks to further expand its reach to researchers in immune-mediated inflammatory disorders, central nervous system disorders, and other diseases and grow sales.
Key themes in the Drug Discovery Support business are the development of new kinase protein products, improving quality in kinase proteins, and improving quality and streamlining workflows in profiling and screening services. The company aims to further enhance quality, develop new products based on customer needs, and improve work processes in a bid to enhance profitability. The company expects to spend JPY133mn (+3.9% YoY) on R&D in the segment in FY12/22 to develop new products and services and improve the quality of existing offerings.
Fund-raising
In July 2021, the company announced the acquisition and cancellation of the series 18 share subscription rights with exercise price adjustment provisions (third-party allocation). The number of rights to be acquired and cancelled was 373, and the acquisition price was JPY3mn (JPY8,258 per share subscription right). The outstanding share subscription rights were not exercised as the company’s share price was trading below the minimum exercise price of JPY1,683. The company applied the funds raised to the cost of preclinical studies and clinical trials for its BTK inhibitors AS-0871 and AS-1763 and pipeline drug discovery.
On the same day it announced the cancellation of the series 18 share subscription rights, the company announced a resolution to issue the series 19 share subscription rights and enter a third-party allocation agreement with the allottee. The company said that the funds raised would be used on expenses for clinical trials for two BTK inhibitors (AS-0871 and AS-1763) and its CDC7 inhibitor (AS-0141), pipeline drug discovery, and in-licensing. Based on the initial exercise price associated with these rights, the amount to be raised is approximately JPY3.6bn (net proceeds) and the number of dilutive shares 2,487,300. The company said it would deploy the funds raised over two years from January 2022 until December 2023 toward clinical trials of compounds under development (JPY2.2bn) and pipeline drug discovery and in-licensing (JPY1.4bn).
The allottee, US-based securities company Cantor Fitzgerald Securities Japan Co., Ltd. (unlisted), will sell the shares acquired by exercising the subscription rights to overseas institutional investors, but will not sell these shares in the market unless Carna permits it to do so. In this manner, Carna hopes to raise the necessary funds while mitigating the impact on the share price and attracting investment from overseas. As of January 2022, 14,978 stock acquisition rights (covering 1,497,800 shares) remained unexercised.
Historical performance vs. estimates
Notes: Figures may differ from company data due to differences in rounding methods.
The company did not release initial forecasts for FY12/14–FY12/16.
To date, differences between actual performance and initial company estimates have depended on whether the company booked sales from licensing agreements at the Drug Discovery and Development business, and have also been attributable to the difficulty of projecting performance at the Drug Discovery Support Business. At the start of the fiscal year, it is challenging to forecast sales associated with licensing agreements, even though such sales are limited to upfront or milestone payments, as the company has yet to bring a product to market. Sales at the Drug Discovery Support business are affected by progress in clients’ R&D, where in many cases the lead time to delivery is short.
In FY12/21, sales significantly exceeded the initial company forecast due to a milestone payment from Gilead Sciences in Q4. The operating loss narrowed due to the milestone payment and higher sales of high-margin kinase proteins in the Drug Discovery Support business.
Drug Discovery pipeline
Overview of major pipeline
Molecular targeted drug R&D is active
R&D of molecular targeted candidates, including low molecular weight kinase inhibitors, is active worldwide. The US Food and Drug Administration (FDA) approved 48 molecular targeted drugs in fiscal 2019, down from 59 in fiscal 2018 but still high. Of these, more than 60% were small molecular targeted drugs, thus confirming molecular targeted candidates, including the small molecule kinase inhibitor drugs in Carna’s pipeline, are still a hot R&D theme. As a result, molecular targeted drugs also accounted for more than 20% of new drug candidates that were awarded Breakthrough Therapy designation and the number has been rising in recent years. A wave of effective new drugs has been approved especially in the oncology field, where there have been successive approvals of immune checkpoint inhibitors, label expansions, and a surge in clinical trials evaluating combinations such as immune checkpoint inhibitors and kinase inhibitor drugs. Thus, expectations are high of an innovative new oncology drug resulting from R&D of molecular targeted candidates.
Out-licensed to Gilead Sciences
Rights to new immuno-oncology drug discovery platform
In June 2019, Carna entered into an agreement under which the company licensed out to US-based Gilead the exclusive rights to develop and commercialize Carna’s immuno-oncology drug discovery program worldwide. In connection with this agreement, Carna booked an upfront payment of USD20mn (about JPY2.1bn) in Q2 FY12/19.
The company will receive up to USD450mn (about JPY47.2bn) more in milestone payments at key stages of progress in development and marketing as well as royalties based on sales after products go on the market. As well, the company will grant exclusive access to Carna’s proprietary fundamental lipid kinase inhibitors discovery technology for a certain period for a fee to support Gilead’s development in the above program.
AS-0141 (CDC7 inhibitor)
AS-0141 is a low molecular weight kinase inhibitor, potent and selective inhibitor of cell division cycle 7 (CDC7) kinase, and available for oral administration. It was originally discovered by Carna that has shown strong inhibitory action against cell replication in various types of cancer in testing involving tumors transplanted from various type of human subjects to test animals.
Carna inked an out-licensing agreement* with Sierra Oncology Inc. (NASDAQ: SRRA) on May 26, 2016, regarding CDC7 inhibitor AS-0141. However, Sierra Oncology opted to terminate the agreement after deciding to concentrate its resources on Phase III trials of momelotinib. On June 25, 2020, Carna reacquired worldwide rights to develop, manufacture, and commercialize AS-0141. Sierra Oncology had filed the investigational new drug (IND) application for AS-0141 in the US in Q3 FY12/18. Carna received the full preclinical study data set** and the active pharmaceutical ingredient/investigational drug produced by Sierra, and will commence clinical trials in Japan in light of the COVID-19 situation in the US. It has formulated a new clinical development strategy using scientific evidence to increase the probability of success, based on careful analysis of clinical data for competitors’ CDC7 inhibitors.
Carna had submitted a notification to the Pharmaceuticals and Medical Devices Agency (PMDA) of its plans to initiate a Phase I clinical study of AS-0141 in patients with solid tumors, a first-in-human (FIH) trial that will be the first in which AS-0141 is administered to humans. The PMDA completed its review in February 2021. In June 2021 the company initiated a Phase I study in Japan in patients with unresectable, advanced, recurrent, or metastatic solid tumors. Objectives of the study include assessing the safety and maximum tolerable dose of AS-0141, as well as determining a recommended Phase II dose.
CDC7 kinase inhibitor
CDC7 (cell division cycle 7) is a type of serine/threonine kinase that plays an important role in controlling the initiation of chromosome replication in the cell cycle. Owing to the irregular cell cycle regulation in cancer cells, inhibition of CDC7 triggers incomplete DNA replication that causes chromosome destabilization and induces apoptosis of the cancer cells. In contrast, cell cycle regulation is not problematic in normal cells so inhibition of CDC7 does not lead to apoptosis. This has prompted expectations of CDC7 inhibitors becoming therapeutic agents with few side effects. It has been reported in recent years that CDC7 is overexpressed in various types of cancer, further raising expectations that CDC7 inhibitors have the potential to become a new therapeutic option.
BTK inhibitor
Carna has two BTK inhibitor drug candidates in clinical trials.
BTK (Brutonalent bond type BT) is known to play an important role in the signal transduction of B cells*1, which make antigens, and macrophages*2, which recognize antigens. Autoimmune disorders like rheumatoid arthritis are considered to be caused by the inflammation as a result of irregular immune responses to the self-organization. As the BTK inhibitor directly inhibits the signaling of macrophages and B cells activated during the inflammation, it is expected to be a new treatment for rheumatoid arthritis with a quite different mechanism of action from existing drugs.
BTK is recognized as an important therapeutic target for hematological malignancies. Ibrutinib, the first BTK inhibitor to be approved in the world, was launched in 2013 to treat leukemia and has been proven to be highly effective. Sales totaled USD5.6bn in 2019 and USD8.4bn in 2020. In 2017, AstraZeneca launched leukemia treatment acalabrutinib, which posted sales of USD160mn in 2019 and USD520mn in 2020.
Ibrutinib inhibits the enzyme activity of BTK by covalently binding to the C481S (481st cysteine) residue. Recent studies have shown that some leukemia patients with C481S mutation are resistant to ibrutinib therapy. Development of a non-covalent BTK inhibitor is required to treat C481S mutation, which may also be resistant to the second-generation covalent inhibitors being developed. Ibrutinib is also known to inhibit kinases other than BTK, with reported side effects attributed to this kinase selectivity. AS-1763 is a non-covalent inhibitor of wild type and C481S-mutant BTK with highly specific kinase selectivity, and thus a promising candidate for the next-generation BTK inhibitor.
Eli Lilly acquired Loxo Oncology for about USD8bn (around JPY870bn at the time) in January 2019 to obtain its pipeline of kinase inhibitors, including LOXO-305 (non-covalent BTK inhibitor). ArQule, which is developing non-covalent BTK inhibitor ARQ531, was acquired by Merck in December 2019 for about USD2.7bn (around JPY290bn at the time). These acquisitions support Carna’s bullish view of the market value for non-covalent BTK inhibitors.
Major competing non-covalent BTK inhibitor candidates in clinical trials
Fenebrutinib (GDC-0853)
Developer: Roche/Genentech
Clinical trial: Phase III (multiple sclerosis)
Potential competing candidate to AS-0871. As of end-July 2021, there were no non-covalent BTK inhibitors in development that target chronic spontaneous urticaria.
ARQ531
Developer: Merck (ArQule)
Clinical trial: Phase II
Potential competing candidate to AS-1763.
LOXO-305
Developer: Loxo Oncology/Eli Lilly
Clinical trial: Phase III
Potential competing candidate to AS-1763.
Out-licensed to Johnson & Johnson, only to be later returned
In the past, the company granted a license for the BTK inhibitor program (exclusive development and sales rights in the world) to Janssen Biotech, Inc., a US subsidiary of the pharmaceuticals division of Johnson & Johnson (J&J), but Janssen returned the rights to Carna later for a strategic reason (see By the way: The license was granted in June 2015 and terminated in August 2016). After the out-licensed rights were returned from Janssen, Carna continued with the development, and in May 2017, published the program on the list of its discovery pipeline in the preclinical studies phase.
Due to a developmental challenge posed by the low solubility of the inhibitor that made its safe evaluation in toxicity tests difficult, Janssen decided that commercializing AS-871 would take more time than it had expected. However, the solubility sharply improved with the help of various formulation technologies, enabling researchers to conduct toxicity tests.
AS-0871(non-covalent BTK inhibitor)
Created by Carna, AS-0871 is a non-covalent BTK inhibitor. With AS-0871 having demonstrated an extremely high degree of selectivity versus BTK, Carna is moving ahead with development work on AS-0871 based drugs to treat inflammatory and immune disorders.
Phase I started in August 2020
After completion of preclinical studies in accordance with GLP standards, the clinical trial application (CTA) for AS-0871 was submitted to the Netherland authorities in December 2019; the Netherland authorities and an ethics committee then approved clinical trials in February 2020. Accordingly, AS-0871 became the first Carna drug to enter in-house clinical trials in the Netherlands. Originally, the company expected the European Phase I trial to begin in Q1 FY12/20, but fallout from the COVID-19 pandemic delayed the timing. On August 25, 2020, administration to healthy adults was initiated in the Netherlands. The Phase I trial will evaluate safety, tolerability, pharmacokinetics, and secondary pharmacodynamics.
In the single ascending dose (SAD) study, a total of 53 healthy adults were evaluated in a placebo-controlled, randomized, double-blind, orally administered trial. AS-0871 was shown to be safe and well-tolerated at all dose levels tested from 5mg to 900mg. There were no serious adverse events reported at all dose levels, and the adverse events reported were all mild and transient. The investigators also analyzed pharmacodynamic effects for evaluation of the extent to which AS-0871 suppresses inflammation and immunity, and concluded that administration of AS-0871 at 100mg or above resulted in strong inhibition of B-cell and basophil activation. As AS-0871 achieved the therapeutic plasma levels sufficient to inhibit B cells and basophils activation, Carna expects orally administered AS-0871 to function effectively as a treatment for inflammatory and immune disorders. Based on these results released in July 2021, the company launched the BA portion of its multiple ascending dose (MAD) study using a new formulation in December 2021.
After completing all three parts of its MAD study, the company plans to launch full-scale efforts aimed at finding partners for out-licensing or joint-development. The company said that it would not press on with clinical trials in-house once the MAD study is complete, but focus on finding a partner. It generally requires six months to a year following the start of negotiations to reach an agreement, so the company expects out-licensing to occur in 2023 at the earliest. In a Phase II study, the company looks to conduct a small, short-term trial in chronic spontaneous urticaria, before expanding therapeutic targets to include other autoimmune diseases such as rheumatoid arthritis, systemic lupus erythematosus, and multiple sclerosis.
Highly selective low molecular weight kinase inhibitor
The BTK inhibitor AS-0871 is a drug candidate for treating autoimmune disorders such as rheumatoid arthritis and allergies. Although BTK inhibitors indicated for blood cancers exist as brand-name drugs, there are none on the market indicated for this disease area.
BTK inhibitor Ibrutinib has already been commercialized as a treatment for hematological malignancies. However, it is a covalent small molecular compound that does not separate after bonding with BTK, so kinase selectivity is a problem. Therefore, it is difficult to develop ibrutinib as a drug for treating immune-mediated inflammatory disorders such as rheumatoid arthritis and allergies for safety reasons. Most of the BTK inhibitors being developed by other companies are also covalent compounds.
Carna’s BTK inhibitor (AS-871), which forms a non-covalent bond, gives the reversibility that the compound (AS-0871) and kinase (BTK) bond can separate as time passes, enabling doctors to control the effects of the drug by adjusting dosage cycles. The drug’s effect is sustained, because the pace of separation is slow. Its high selectivity to kinases (other than BTK, it inhibits only TEC and BMX, other kinases of the TEC family*) make it safe.
Accordingly, it is expected to be a new option for the treatment of patients with allergy and autoimmune diseases like rheumatoid arthritis, chronic spontaneous urticaria, and systemic lupus erythematosus (SLE). A mouse model with collagen-induced arthritis demonstrated a good treatment effect for oral administration that the arthritis score fell to less than half.
Carna is developing AS-0871 as a treatment for inflammatory and immune disorders because of its high kinase selectivity. AS-0871 is a non-covalent small molecular compound and can separate from BTK even after they bind (see below figures). Since it also has high kinase selectivity (see below figures), it has been developed as a drug for treating immune-mediated inflammatory disorders such as rheumatoid arthritis and allergies.
Thus, there is a high level of interest in AS-0871 among pharmaceutical companies, which likely are awaiting the outcome of Carna’s clinical studies. According to Carna, although there are competing BTK inhibitors that target immune-mediated inflammatory disorders, AS-871 has the edge in its high selectivity and being a non-covalent inhibitor that detaches slowly from the target kinase.
AS-1763 (BTK inhibitor)
AS-1763 is a next-generation BTK inhibitor aimed at treating ibrutinib-resistant hematological malignancies. Preclinical studies needed to begin clinical trials were completed in 2020 and the documentation needed for a clinical trial application (CTA) was submitted to the regulatory authorities in the Netherlands in January 2021, with the authorities and an ethics committee then approving clinical trials in February 2021. Carna believes this could pave the way for AS-1763 to be used to treat not only blood cancers, but also auto-immune diseases.
Clinical trials in the Netherlands
In May 2018, Carna concluded an agreement with Germany-based Evotec AG, and it has since conducted preclinical studies using Evotec’s INDiGO platform, completing the GLP studies required to initiate Phase I clinical trials. In May 2020, the company revised its development strategy regarding US clinical trials for anticancer agents in consideration of fierce competition to recruit patients. Specifically, the company established the foundation for in-house clinical trials in Europe through the CTA application of AS-0871, so it revised its US IND filing plans and submitted the European CTA (in the Netherlands) in January 2021. In February 2021, the Netherlands’ Ethics Committee approved the CTA, based on which the company started the single ascending dose (SAD) part of a Phase I clinical study in healthy adults in the Netherlands in April 2021. In the SAD study, a total of 56 healthy adults are being evaluated in a placebo-controlled, randomized, double-blind, orally administered trial. The primary objectives are to assess the safety and tolerability of AS-1763 as well as to measure its pharmacokinetics and pharmacodynamics. After completion of this SAD study, Carna plans to initiate a Phase I oral dose escalation study in chronic lymphocytic leukemia (CLL) and B-cell lymphoma patients in the US from 2022, and is now laying the groundwork for an IND application.
Greater China rights out-licensed to BioNova Pharmaceuticals
In March 2020, Carna turned its attention to China, where it is easier to recruit patients, and concluded a license agreement with Chinese company BioNova Pharmaceuticals that confers development and marketing rights in Greater China (People’s Republic of China and Taiwan). Under the agreement, BioNova will conduct clinical trials in China. Carna believes it can accelerate clinical trials of AS-1763 by gathering and using BioNova’s clinical trial data as well as maximize the value of AS-1763 at the earliest opportunity. In January 2022, BioNova filed an IND application with China’s National Medical Products Administration (NMPA) with a view to conducting clinical trials in China. In addition to the upfront payment already received, Carna is poised to receive up to USD205mn (about JPY21.5bn) from BioNova as development of AS-1763 hits various milestones in Greater China. In addition, it will receive up to double-digit tiered royalty payments on AS-1763 sales in Greater China.
Next-generation BTK inhibitor for Ibrutinib-resistant hematological malignancy
The BTK inhibitor AS-1763 was being developed by Carna as a backup compound to AS-0871. It was added to the company’s pipeline table in November 2017 as a compound at the preclinical studies phase following rapid progress with R&D as a drug candidate indicated for blood cancers.
AS-1763, discovered by Carna, was found to be effective not only against wild type BTK, but also mutant BTK. Carna is therefore developing the compound as a next-generation BTK inhibitor to treat patients with ibrutinib-resistant blood cancers. Like AS-0871, AS-1763 is a highly selective, non-covalent, reversible BTK inhibitor, which could potentially be used as a treatment for immune-mediated inflammatory diseases such as rheumatoid arthritis and allergies.
AS-1763 is a highly selective, orally bioavailable, non-covalent inhibitor of both wild type and C481S-mutant Bruton’s tyrosine kinase (BTK). BTK is known to play an important role in transmitting B cell receptor (BCR) signals that are involved in the division and proliferation of B cells, and is recognized as an important target for blood cancer therapies. AS-1763 is being developed as the next-generation BTK inhibitor indicated for blood cancers. The first approved BTK inhibitor is ibrutinib. It is a highly effective treatment for B cell tumors, including chronic lymphocytic leukemia (CLL). According to EvaluatePharma’s “World Preview 2019, Outlook to 2022,” global sales of BTK inhibitors are estimated at USD9.5bn in 2024, and we assume significant market size in the blood cancers disease area.
In the presentation material released with the FY12/18 earnings announcement, Carna described AS-1763 as a non-covalent small molecular compound like AS-0871. The company also published data comparing BTK inhibition activity and kinase selectivity of CB-1763 to those of ibrutinib, which indicated better outcomes for AS-1763 in terms of effectiveness against C481S-mutant BTK and kinase selectivity (see below figures). As such, Carna’s AS-1763 is also promising as a treatment for blood cancers resistant to ibrutinib therapy and will thus be closely watched by pharmaceutical companies.
Joint research program with Sumitomo Dainippon Pharma
In March 2018, Carna and Sumitomo Dainippon Pharma Co., Ltd. (TSE1: 4506) signed an agreement on joint research and development with the aim of discovering innovative treatments for psychiatric and neurological disorders. The research is proceeding smoothly, generating data regarding new drug candidates for psychiatric and neurological disorders as well as creating IP. Based on progress to date, in December 2021, the companies agreed to extend the joint research period until March 27, 2025. Under the agreement, Carna will own the exclusive global right for clinical development and sales for any kinase inhibitor discovered for treating any disease other than cancer. The agreement also calls for Carna to receive up to JPY80mn from Sumitomo Dainippon Pharma, including an upfront payment and milestone payments. Carna will also receive up to JPY10.6bn in milestone payments at key stages of progress in development and marketing, as well as royalties based on sales after products go on the market.
STING antagonist (inhibitor and antagonist)
STING (Stimulator of Interferon Genes) is a type of protein, and plays a key role in innate immunity. Excessive signaling via the STING pathway causes a number of high unmet need diseases, including autoimmune disorders such as systemic lupus erythematosus and rheumatoid arthritis. The company's new attempt to discover and develop non-kinase targeting drugs gave birth to the novel STING antagonist, and in December 2021, it moved to the preclinical study stage.
In February 2022, Carna entered into a licensing agreement with US-based Brickell Biotech, Inc. (NASDAQ: BBI), granting it exclusive global rights to develop and commercialize its novel STING antagonist. The company will receive an upfront payment of USD2mn (about JPY227mn) from Brickell. The company will also receive milestone payments in accordance with Brickell's progress in development, approval filing, and obtaining of approval, as well as sales milestone payments of up to USD258mn (approx. JPY28.3bn at JPY110/USD). Further, the company is eligible to receive tiered royalties on Brickell's sales after the launch of the drug candidate, in rates ranging from mid-single digits up to 10%. The agreement covers only auto-immune disorders. Carna will continue with its own research into STING modulators (agonists and antagonists). However, it will limit its activities in antagonists to new skeletal and oncology areas.
Drug Discovery Pipeline
Note: The company is conducting exploratory research into multiple drug candidates other than those listed above to build a next-generation pipeline.
Combination therapy for cancer
In the cancer field, the current main focus of drug development is not to extend life but to find a cure. Combination therapy is attracting considerable attention as a means of curing cancer. Two examples include the combination between Ono Pharmaceutical’s (TSE-1: 4528) anti-PD-1 antibody and immune checkpoint inhibitor, Opdivo (generic name: nivolumab), and Bristol-Myers Squibb’s (NYSE: BMY) Yervoy (ipilimumab), as well as the combination between Eisai’s (TSE-1: 4523) oral kinase inhibitor, Lenvima (lenvatinib), and Germany based The Merck Group's (ETR: MRK) anti-PD-1 antibody Keytruda (pembrolizumab).
As drugs targeting kinases can be expected to demonstrate greater efficacy when used in combination with products such as Opdivo or Keytruda, Carna’s pipeline contains a number of drug candidates linked to cancer therapy. Pipeline products identified as cancer therapies have been shown to work well in the context of combination therapy, and Carna believes some have huge potential as potential cures for cancer.
Strategy and outlook
Basic policy
Drug Discovery Vision 2030
Under its Drug Discovery Vision 2030 initiative, Carna aims to become a leading company that continually discovers innovative drugs with a focus on diseases that do not yet have effective treatments such as cancer and immune-mediated inflammatory disease. Now that the company has established the ability to conduct clinical trials on its own, it aims to maximize the business value by expanding in-house clinical trial development pipelines in priority drug discovery programs. The company looks to accelerate research at an early stage, even for drug discovery programs in the exploratory phase, through research collaboration.
Medium-term outlook (FY2022–2026)
On February 10, 2022, in lieu of its usual medium-term business plan, the company disclosed its explanatory materials for business plan and growth potential, which contained the outlook from FY2023 through FY2026 as well as its forecast for FY12/22.
Carna targets the development of innovative new drugs for treating diseases where the unmet medical needs are high and effective treatments have yet to be developed, especially cancers and auto-immune disorders. Its R&D covers drug discovery targets through new drugs, and it has the technological capabilities to continuously refresh its drug discovery pipeline, and aims to drive strong growth by launching a series of innovative therapies.
In the Drug Discovery Support business, the company provides products and services to enable pharmaceutical companies to research kinase inhibitors, and aims to stabilize the company’s financial position with steady revenue and supply drug discovery tools internally. In the Drug Discovery and Development business, it is investing in R&D into therapies for cancer and auto-immune diseases using its kinase drug discovery platform technology.
Growth strategy
The company’s core strategy aims at a significant increase in its enterprise value as a clinical stage biotech through conducting clinical trials for its pipeline. It has outlined strategic timeframes as shown below.
Started in-house drug discovery research (2010-2015)
Demonstrated drug discovery capabilities (2016-2020)
Maximizing value of pipelines (2021–2025, plan)
Sustainable profit generation (2026–2030, plan)
In line with the above strategy, the company plans to maximize the out-licensing value of existing pipelines through clinical trials in the Drug Discovery and Development business while developing the next series of pipelines to earn milestone and royalty payments.
In the Drug Discovery Support segment, plans call for expanding sales of proprietary development products and services, especially in North America and Asia; new customer development; and ongoing launch of new products and services to maintain and grow sales to achieve stable earnings and fund development of the company’s own drug discovery activities.
The company plans R&D spending of JPY2.2bn in FY2022 and JPY1.0bn–2.5bn yearly in 2023–2026, aimed at future growth. Capex plans call for investment of JPY124mn in FY2022 and JPY20mn–100mn yearly in 2023–2026 in R&D equipment and new and replacement IT system devices.
Out-licensing multiple drug pipelines
Aggressive information exchange with many pharmaceutical companies
With the results of multiple R&D activities, the company is taking measures to out-license these and other pipeline drugs in the optimization phase by actively providing information and entering into talks with many pharmaceutical companies at the BIO International Convention (held regularly in North America, Europe, Japan, and elsewhere) and other networking opportunities.
Launch in-house clinical trials to maximize out-licensing value of drug discovery pipeline
Shifting focus from clinical trial strategy to building infrastructure for in-house trials
For over 10 years following its founding in 2003, Carna did not produce a drug candidate that made it to the in-house clinical trial phase, but this changed from August 2020 when BTK inhibitor AS-0871 began clinical trials, representing the first Carna drug candidate to reach the clinical trial stage and marking the dawn of a new era for the company’s drug discovery business.
Building infrastructure for clinical development
Carna’s drug discovery business has attained a level of research technology sufficient to be able to continuously turn out new drug candidates. Previously, the company only out-licensed drugs in the preclinical study phase. In order to enhance the out-licensing value of its drug pipelines, however, the company considers it important to confirm that drug candidates are effective and safe for humans. Accordingly, the company looks to conduct up to Phase II clinical trials in-house before out-licensing a candidate in the oncology field and conduct in-house studies up to Phase I clinical trials in other fields. It therefore has started building the infrastructure needed to conduct in-house clinical trials*.
To that end, in July 2018 the company set up a clinical development department in its R&D division. In February 2019, the company also set up a clinical development office in South San Francisco, to serve as a base for clinical studies in the US. These measures will enable Carna to control the entire process, from formulating clinical trial strategy to conducting clinical trials.
Business
Description
Carna Biosciences (Carna) researches and develops drug candidates to address unmet medical needs across several therapeutic areas such as oncology and immune-mediated inflammatory diseases (rheumatoid arthritis). The company targets sales from out-licensing its pipeline of various drug candidates, including blockbuster drugs to large pharmaceutical companies, based on agreements that grant worldwide rights.
The company’s research and development of kinase inhibitor drugs focus on oncology and immune-mediated inflammatory diseases. The current drug candidates in its pipeline mainly target cancers.
The following factors differentiate Carna in the anticancer drug market:
Extensive knowledge as the world’s only biotechnology company involved in both kinase inhibitor research as well as kinase manufacturing and sales.
A track record of out-licensing drug candidates to major pharmaceutical companies (granting worldwide rights) and a promising drug candidate development pipeline.
Creation of a proprietary pipeline using an in-house chemical synthesis team, in addition to strong ties with universities.
Business segments: Drug Discovery Support, and Drug Discovery and Development. Drug Discovery Support provides other pharmaceutical companies and research institutions with products and services needed for new drug development and research, while Drug Discovery and Development develops the company’s proprietary kinase inhibitors.