Monte Rosa is a preclinical biotech that is developing targeted protein degraders to treat cancer and inflammatory diseases. Monte Rosa went public in June of 2021. Unlike other targeted protein degradation (TPD) companies, Monte Rosa is only developing monofunctional degraders. At the heart of Monte Rosa is their discovery platform, Quantitative Engineered Elimination of Neosubstrates (QUEEN). While the company is exciting, everything is still too speculative and Monte Rosa has done little to convey its future vision to the public.

QuEEN (Quantitative Engineered Elimination of Neosubstrates)

At the heart of Monte Rosa is their QuEEN discovery platform. QuEEN works by understanding how the surface of the E3 ligase changes following binding of the small molecule drug and how this change in surface allows binding to structural feature on the surface of the target protein. The QuEEN discovery platform is composed of Monte Rosa’s degron encyclopedia, proprietary molecular glue degrader library, and glue-omics toolbox.

1. The degron encyclopedia is a catalogue of target proteins that have been identified using Monte Rosa’s AI-powered algorithm. The algorithm consists of a deep neural network that has been trained to identify topological, structural, and sequence features associated with known degrons to identify new potentially therapeutically relevant proteins.

2. The molecular glue degrader library is of small molecules that have been rationally designed. Their library consists of between 7,000 and 20,000 unique molecular compounds that have been designed to include properties that resemble those of approved drugs.

3. The glueomics toolbox is a suite of biochemical, proteomic, and computational screening tools designed to enable discovery and optimization of molecular glues that efficiently induce binding of the E3 ligase to the target protein. This tool box includes Rhapsody, a suite of software that allows the in silico screening of molecular glues and modeling of the ternary complex, and a portfolio of proteomic profiling assays.

Pipeline

Monte Rosa’s most advanced asset is a degrader of G1 to S phase transition 1 (GSPT1), which is also referred to as eukaryotic release factor 3a (eRF3A). Currently, MRT-048 appears to be their lead compound. GSPT1 is involved in the regulation of mammalian cell growth and in translation termination. In vivo assays with multiple Myc-driven cancer models have demonstrated that degradation of GSPT1 leads to cell death. The candidates, which Monte Rosa have disclosed, display selectivity for GSPT1 over classical immunomodulatory imide drug neosubstrates, IKZF1 and IKZF3. Monte Rosa has initiated IND-enabling studies in and expects to submit an investigational new drug application to the FDA in the first half of 2022. Other assets include NEK7 degraders, CDK2 degraders, and VAV1 degraders, which are all still very nascent.

How $GLUE is Drugging the Undruggable

Monte Rosa is relying on their discovery platform to enable to the development of monofunctional degraders that can drug the undruggable. It seems like they are starting from lenalidomide and focused on developing derivatives with highly selective degradation profiles. This approach makes sense because they are focused on using cereblon and the different binding modes of lenalidomide derivatives to cereblon have been well characterized. Additionally, since the properties of lenalidomide and many of its derivatives are so well characterized that this approach allows for further derisking, which is a strategic move. Unfortunately, their approach restricts them to a chemical space that many other companies are also searching in. While executives from Monte Rosa mentioned that they were interested in targeting other E3 ligases and expanding their scaffold diversity at the Morgan Stanley Global Healthcare Conference in September 2021, they revealed no further information, so we’re keeping an ear out.

Unlike most other TPD biotechs, Monte Rosa is focusing on drugging the undruggable and not redrugging the druggable. However, they are not expanding the chemical space in order to discover new drugs, but searching a narrow area of the chemical space with a finer tooth comb. Monofunctional degraders have been the most successful TPD drugs to date and if Monte Rosa is to develop on design principles there is a lot to like.

The Management

The company is based in Boston and Basel, two world-class biotech hubs. In some ways the company can be seen as a European TPD player, with a diverse group of European leaders and past experiences. The CTO came from Kymera's TPD platform bio team. The CSO led Global Discovery Chemistry at Novartis. The Chief Data Scientist (given $GLUE’s heavy AI-capabilities) has a deep academic background and comes from $AGEN and $BNTX. Finally, there is a very ‘smart’ biotech base of investors & board members that will be crucial for securing future partnerships & deals that other TPD players have.

The Parallax View

We believe the success of Monte Rosa will come down to the macro of the TPD space and the ability of QuEEN to identify new target protein and generate lead compounds with the desired properties. Though Monte Rosa has a long cash runway, with ~350M cash on hand as of June 2021, they have the least advanced pipeline out of the public TPD companies. So, the success or failure of TPD drugs in the clinic will alter the future value of Monte Rosa’s pipeline. Moreover, the ability of QuEEN to identify therapeutically relevant targets and lead compounds is an important part of Monte Rosa’s value proposition. Consider Bayer’s acquisition of Vividion, which demonstrates the potential value of a robust discovery platform utilizing chemoproteomic tools and proprietary chemical libraries.

Currently, there is too little concrete information about Monte Rosa at this point to feel strongly positive about this company, but we feel that there is something here, especially if they pass through each clinical phase swiftly and catch up with their peers. Note that the lockup expiration period after its IPO is 12/21/2021, so do expect some volatility heading into Q1 2022.

Financial Health

• Market Cap: ~$950M

• Shares outstanding: 46M

• Float: 22 M (~48%)

• Owned by institutions: 80%

• % Short of float: 8.27%

• Cash equivalents: $357M as of Q2, if similar burn rate Q3, they will be closer to $338M

• Q2's cash burn was at 31M from operations, with 15M of R&D expenses and 3M of SG&A expenses

Institutional Ownership:

• NEA: 16.6%

• Versant Venture Capital: 14.7%

• Avoro: 7%

• Cormorant Asset Management: 6.9%

• Blackrock: 3.3%

• Orbimed: 0.8%

Price Targets (Average $36):

• $38 - JPMorgan

• $30 - Guggenheim

• $40 -  Piper Sandler