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NantKwest (NK): Billionaire’s Company Joins the Russell Microcap Index

NantKwest, led by billionaire Dr. Patrick Soon-Shiong, is now part of both the Russell Microcap and Russell 2000 Indexes.

As we highlighted last week, the annual rebalancing of the benchmark FTSE Russell indexes took effect after Friday’s close, leading to the Nasdaq’s highest volume day and the NYSE’s second highest volume day of 2017. Among the companies we’ve been following that were impacted by the index reconstitution is NantKwest (NYSE: NK), the brainchild of billionaire founder and CEO, Dr. Patrick Soon-Shiong. NantKwest is developing treatments for cancer, infectious diseases and inflammatory diseases based on the immune system’s natural killer (NK)

NantKwest went public two years ago, raising $238 million at a post-money valuation of $2 billion, squarely in Russell 2000 territory. Today, with a market cap of just $630 million (up from its all-time low of $225 million less than two months ago), the stock has also been added to the Russell Microcap Index, which includes the smallest 1000 of the Russell 2000 along with 1000 additional smaller stocks. 194 stocks were added to the Microcap Index, with 137 coming out as part of the annual rebalancing.

Cancer Breakthroughs 2020

Dr. Soon-Shiong helped form the National Immunotherapy Coalition in 2016, inspired after meeting previously with Vice President Joe Biden, whose son was suffering from brain cancer at the time and whose foundation has launched the Biden Cancer Initiative. As described by Laura Lorenzetti in Fortune last year, the coalition consists of large pharmaceutical companies including Amgen (Nasdaq: AMGN) and Celgene (Nasdaq: CELG), biotech startups and academic institutions that are pursuing the “next generation standard of care” for cancer patients. The coalition’s “Cancer Breakthroughs 2020” program aims to initiate randomized Phase II trials in patients at all stages of disease in 20 tumor types in 20,000 patients within the next 36 months. It is hoped that these findings will inform Phase III trials and the breakthroughs to develop an effective vaccine-based immunotherapy to combat cancer by 2020.

Natural Killer (NK) cell based platform

According to NantKwest, NK cells, in contrast to adaptive immune cells such as T-cells, are uniquely powerful in that they are always activated to attack diseased cells, without a delay in killing. It is believed that NK cells have the innate ability to rapidly seek and destroy abnormal cells, such as cancer or virally-infected cells, without prior exposure or activation by other support molecules.

NantKwest’s NK cell platform has been produced and utilized as an “off-the-shelf” treatment in Phase 1 clinical trials, and has demonstrated tumor killing abilities. Unlike normal NK cells, the company’s proprietary Activated Natural Killer (aNK) cells do not express killer inhibitory receptors, which diseased cells often exploit to evade the killing function of NK cells. These aNK cells have been optimized to lack these inhibitory receptors while retaining the broad array of activating receptors which enable the selective targeting and killing of diseased cells. The aNK cells also carry a larger payload of cytolytic granules to their tumor targets. Safety studies of aNK cells in dozens of patients treated in Phase I clinical trials have been conducted in a variety of advanced hematological malignancies and solid tumors.

Activated Natural Killer “Off-The-Shelf” Cell: The aNK Cell:

Source: NantKwest

In addition to the core aNK cells, the company is developing two complementary modes of action:

  • Antibody-mediated killing using haNKs, which are aNK cells engineered to incorporate a high affinity receptor that binds to an administered antibody, enhancing the cancer cell killing effect of that antibody.
  • Target-activated killing using taNKs, which are NK cells engineered to incorporate chimeric antigen receptors to target tumor-specific antigens found on the surface of cancer cells.

In May 2017, the company announced that it had received FDA clearance to start enrolling patients for
its Phase Ib/II trial of its cancer vaccine based on the NK cell platform
. Subsequently, earlier this month, NantKwest announced at the Annual American Society for Clinical Oncology meeting that it had expanded its existing cancer vaccine program in pancreatic cancer to target a number of additional tumor types, including lung, breast, head and neck, colon, melanoma, ovarian, urothelial, Hodgkins and non-Hodgkins lymphoma, sarcoma and Merkel cell carcinoma.

Dr. Patrick Soon-Shiong

Dr. Soon-Shiong has founded, led and sold two pharmaceutical companies: American Pharmaceutical Partners, acquired by Fresenius SE (XETRA: FRE; OTCQX: FSNUY) and Abraxis BioScience, acquired by Celgene. Dr. Soon-Shiong is credited with inventing and developing Abraxane, which is FDA approved for the treatment of metastatic breast cancer, lung cancer and advanced pancreatic cancer. He’s a surgeon, adjunct professor of surgery at UCLA and a recognized scientist, with over 230 patents worldwide in technology and medicine. Dr. Soon-Shiong’s corporate umbrella is NantWorks, which includes NantKwest and his majority-controlled NantHealth (Nasdaq: NH), a healthcare information technology company.

According to Ms. Lorenzetti in Fortune, the outspoken Dr. Soon-Shiong has also been “the center of controversies within the cancer industry. He is prone to making large statements and pushing big ideas, which many researchers have said are overblown.” In a story in Forbes in 2014, John Halamka, the chief information officer for Beth Israel Deaconess Medical Center in Boston, called Dr. Soon-Shiong “a showman of sorts.”

NantKwest stock

The stock hit an all-time low of $2.71 on May 8, 2017, immediately prior to the announcement of the FDA’s clearance for the company to enroll patients for its Phase 1B/II trial. Since then, in less than two months, the stock has rebounded back to $7.60. NantKwest’s introduction to the Russell Microcap Index obviously reflects the two-year decline in the stock since its $25 per share IPO, but it may prove to be a blessing going forward as the stock is now necessarily in the crosshairs of microcap asset managers in addition to those who benchmark to the Russell 2000. We’ll be keeping close watch on NantKwest alongside the new asset managers to see if Dr. Soon-Shiong and the company can execute through the key clinical trials.

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The astronomer Carl Sagan said, “It was easy to predict mass car ownership but hard to predict Walmart.”