Sonnet BioTherapeutics Holdings, Inc. (NASDAQ:SONN) is a clinical-stage, oncology-focused biotechnology company with a proprietary platform for innovating biologic medicines of single or bifunctional action. The company's lead asset, SON-1010, is a fully human version of Interleukin 12 (IL-12) that is currently in clinical development for solid tumor indications. Additionally, Sonnet is advancing SON-080, a fully human version of Interleukin 6 (IL-6), in target indications of Chemotherapy-Induced Peripheral Neuropathy (CIPN) and Diabetic Peripheral Neuropathy (DPN).

Business Overview

Sonnet's proprietary platform, known as F H AB™ (Fully Human Albumin Binding), utilizes a fully human single chain antibody fragment (scFv) that binds to and "hitch-hikes" on human serum albumin (HSA) for transport to target tissues. This technology is designed to improve drug accumulation in specific tissues and extend the duration of activity in the body. Sonnet's F H AB development candidates are produced in a mammalian cell culture, which enables glycosylation, thereby reducing the risk of immunogenicity.

The company's lead proprietary asset, SON-1010, is a fully human version of IL-12 covalently linked to the F H AB construct. Sonnet is pursuing clinical development of SON-1010 in solid tumor indications, including ovarian cancer, non-small cell lung cancer, and head and neck cancer. In March 2022, the FDA cleared Sonnet's Investigational New Drug (IND) application for SON-1010, allowing the company to initiate a U.S. clinical trial (SB101) in oncology patients with solid tumors during the second quarter of 2022. Additionally, Sonnet received approval and initiated an Australian clinical study (SB102) of SON-1010 in healthy volunteers during the third quarter of 2022.

In January 2023, Sonnet announced a collaboration agreement with Roche for the clinical evaluation of SON-1010 with atezolizumab (Tecentriq®). The companies have entered into a Master Clinical Trial and Supply Agreement (MCSA) to study the safety and efficacy of the combination of SON-1010 and atezolizumab in a platinum-resistant ovarian cancer (PROC) patient setting. The trial consists of a modified 3+3 dose-escalation design in Part 1 to establish the maximum tolerated dose (MTD) of SON-1010 with a fixed dose of atezolizumab, followed by an expansion group to confirm clinical benefit and establish the recommended Phase 2 dose (RP2D). Part 2 of the study will then investigate SON-1010 monotherapy, its use in combination with atezolizumab, or the standard of care (SOC) for PROC in a randomized comparison to show proof-of-concept (POC).

Sonnet's most advanced compound, SON-080, is a fully human version of Interleukin 6 (IL-6) that the company acquired the global development rights to in April 2020. Sonnet is advancing SON-080 in target indications of CIPN and DPN. The company received approval to initiate an ex-U.S. Phase 1b/2a study with SON-080 in CIPN, and the Data Safety Monitoring Board has cleared the trial to proceed to Part 2 after reviewing the preliminary safety data. Pursuant to a license agreement with New Life Therapeutics Pte, Ltd. of Singapore, Sonnet and New Life will be jointly responsible for developing SON-080 in DPN.

Sonnet's pipeline also includes SON-1210, a bi-specific construct that combines F H AB with fully human IL-12 and fully human Interleukin 15 (IL-15), which is being developed for solid tumor indications, including colorectal cancer. In February 2023, the company announced the successful completion of two IND-enabling toxicology studies with SON-1210 in non-human primates. Additionally, SON-1410, a bi-specific combination of Interleukin 18 (IL-18) and IL-12 for solid tumor cancers, is in early-stage development.

Financials

Sonnet has incurred recurring operating losses and negative cash flows since inception. For the fiscal year ended September 30, 2023, the company reported an annual net loss of $18,832,694, annual revenue of $147,805, annual operating cash flow of -$21,341,842, and annual free cash flow of -$21,785,092.

In the most recent quarter ended March 31, 2024, Sonnet reported a net income of $365,425, compared to a net loss of $5,667,071 in the same quarter of the prior year. Revenue for the quarter was $0, down from $36,445 in the prior year quarter. Operating cash flow for the quarter was -$2,367,945, and free cash flow was -$2,367,945.

The decrease in revenue was due to the completion of R&D activities related to the company's collaboration agreement with New Life Therapeutics. The improvement in net income was primarily attributable to a $4.3 million gain from the sale of New Jersey state net operating losses, as well as a reduction in research and development and general and administrative expenses as a result of cost-saving initiatives.

Liquidity

As of March 31, 2024, Sonnet had cash of $3.8 million, which the company believes will fund its projected operations into July 2024. The company has evaluated whether there are conditions or events that raise substantial doubt about its ability to continue as a going concern, and has concluded that such doubt exists.

To address its liquidity needs, Sonnet plans to secure additional capital in the future through equity and/or debt financings, partnerships, collaborations, or other sources. On May 2, 2024, the company entered into a Committed Equity Facility (the "Facility") with Chardan Capital Markets LLC, which will allow Sonnet to raise primary equity on a periodic basis at its sole discretion, subject to certain limitations.

Risks and Challenges

Sonnet faces risks associated with companies whose products are in development, including the need for additional financing to complete its research and development, achieving its research and development objectives, defending its intellectual property rights, recruiting and retaining skilled personnel, and dependence on key members of management.

Outlook

The company has not provided any specific financial guidance for the upcoming fiscal year. However, Sonnet has stated that it expects to continue to incur significant expenses and increasing operating losses for at least the next several years as it advances its product candidates through clinical development and potentially seeks regulatory approvals and commercialization.

Conclusion

Sonnet BioTherapeutics is a promising oncology-focused biotech company with a proprietary platform for developing innovative biologic drugs. The company's lead asset, SON-1010, is progressing through clinical trials, and the collaboration with Roche for the evaluation of SON-1010 in combination with atezolizumab represents a significant opportunity. Additionally, Sonnet's advancement of SON-080 in CIPN and DPN, as well as its earlier-stage pipeline, demonstrate the breadth of its innovative approach. While the company faces liquidity challenges and risks inherent to drug development, Sonnet's unique technology and diversified pipeline warrant close attention from investors in the biotechnology sector.