CARGO Therapeutics (CRGX) (~$150MM market cap) is a clinical-stage biotechnology company that is developing CAR T-cell therapies for cancer patients. Last night, the company issued a press release stating they're discontinuing the FIRCE-1 Phase 2 Study of their lead asset, firicabtagene autoleucel, due to a non-competitive benefit risk profile for patients. The stock is down approximately 75% on the news.
Additionally, CARGO announced they are going to evaluate strategic options and are commencing a 50% reduction in force. The announcement is not a full waving the white flag, they do have a Phase 1 ready asset in CRG-023 that just received an IND application approval from the FDA earlier this month. CARGO currently plans to go ahead with mid-year launch of a Phase 1 study, but my guess is those plans could change by then depending on what happens with the strategic review. CARGO was a late 2023 IPO and thus has a nice chunk of cash remaining on their balance sheet that could be attractive to a reverse merger partner and provides some margin of safety at these prices if the process drags out.
Above is my typical back of the envelope math on a potential liquidation value for CRGX. The shareholder base here seems pretty vanilla, there are no cornerstone biotech investors owning more than 10%, the board is staggered and management owns very little stock. It might need an activist or other push to get things moving here, but I like the discount to a large cash balance and added it to my broken biotech basket.
Disclosure: I own shares of CRGX
Thank you for the write-up, this one seems interesting. Did you happen to look at ALLK too? I bought some of that as well. BVF has had a few good deals, explicitly guiding cash for Q2'25, RIF, etc.
ReplyDeleteI do love the explicit disclosure, CRGX had a similar one on the overall restructuring costs (not just the severance) but stopped short of the 6/30 estimated cash level. With ALLK, they have a pretty large operating lease that runs through October 2031, it appears that the estimated cash is not accounting for a lease termination? If it is accounting for the lease, then its cheap, if its not, then I'm not so sure, sort of a bet on what the termination payment will be.
DeleteThey cancelled a lease on 11/15/24 per the 8-k, I think that is the big one, but I'm not sure?
ReplyDeleteOops, I missed that, yeah pretty interesting then. Not as large of a cash pile as I normally like, but the certainty of the 6/30 disclosure makes it pretty cheap.
DeleteI should say they negotiated a cancellation to the lease on 11/15/24. The payment is supposed to happen before the end of q2, so I would think they would include that, but can't be sure I guess: The term of the Lease was scheduled to expire on November 30, 2031. The Lease Termination Agreement provides for, among other things, amendment of the term such that the Lease will terminate no earlier than January 1, 2025, and no later than March 31, 2025. As consideration for the Landlord’s agreement to enter into the Lease Termination Agreement and accelerate the expiration date of the Lease, the Company has agreed to pay a lease modification payment to the Landlord in an amount of approximately $2.3 million, of which approximately $1.5 million will be paid on or after January 1, 2025, by the Landlord drawing down and retaining the Company’s security deposit for the Premises in the form of a letter of credit secured by restricted cash, and the remainder will be paid upon the early lease termination date described above. The Company also incurred broker commissions of approximately $1.7 million. The net effect on cash and cash equivalents of these costs related to the termination is approximately $2.5 million.
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