Heat Biologics Inc (NASDAQ:HTBX) struggled during the final quarter of 2016, as the company put out disappointing results from its lead bladder cancer trial. Sentiment remained pretty negative towards the close of the year, but as 2017 has kicked off, there seems to be some degree of reversal. The company is up around 10% year to date, having previously run up to highs just short of $1.1 a share mid-last week.During the first week of January, we learned that a new chief scientific officer (CSO) was set to take his position at the company, and that the company's previous CSO would be moving to what is essentially a biotechnology startup. At that point, the details remained pretty opaque. Since, however, there has been released a fair amount of clarity into the situation, and it looks as though Heat might be in line for getting itself back on track this year.Here is what we know, and what it means for the company.Interestingly, the new hire comes from a company that we have also covered a number of occasions in the past, and one for which we also hold a bullish bias – Peregrine Pharmaceuticals (NASDAQ:PPHM). Peregrine is in the business of developing oncology therapies, but also operates a contract manufacturing organization (CMO) called Avid, which generates revenues that pretty much offset its entire operational cost and research and development expense. This makes the company one of the most attractive biotechnology entities of its size right now, with this attraction rooted in the mitigated necessity for dilution to fund operations.Anyway, Heat's new CSO is Jeff Hutchins, Ph.D, who prior to this latest announcement, served as Vice President of Preclinical Research at Peregrine.So what does this mean for Heat?Hutchins is well known for pushing preclinical assets into clinical development, and concurrently, justifying the raising of funds or the signing-on of a partner in the process. Before his stint at Peregrine, which by all accounts was an extremely successful run, he served as Vice President, Preclinical Development at Inhibitex Inc, which was acquired by Bristol-Myers Squibb Co (NYSE:BMY). The assumption, then, is that his remit will be to drive the lower pipeline of Heat into mid to late stage clinical development, and in turn, add some value to a stock that has seen a large portion of its valuation deplete on the back of the above-mentioned disappointing data.That's not all we learned, however. Heat has a very amicable relationship with the CSO that just left the company, and has announced that the guy in question, Taylor Schreiber, is joining an entity called Shattuck Labs, Inc. Shattuck is an independently funded biotech startup that – mid last year – took over some of Heat's preclinical assets for development under the new CSO and management team. Heat has signed an agreement (the details of which have not been released publicly) that will see the company generate royalties and milestone payments on the development of these assets, so we see this as a potential topline boost across the next 24 months.The only publicly available information relating to this agreement is the following, taken from Heat's third quarter 10K:
"We recognized $220,233 in research funding revenue for the quarter ended September 30, 2016 pursuant to our exclusive license agreement with Shattuck Labs, Inc. (“Shattuck”) to allow Shattuck to take over the research and development of certain preclinical assets."
It's not particularly clarity inducing, but it does offer some degree of insight into the numbers associated with the deal.So what's next?We are watching closely for announcements from Heat that detail where the company plans to go next with its two lead assets. There is a lung cancer trial ongoing, and we expect this to underpin the majority of the company's valuation near term. However, with someone like Hutchins now in place as CSO, there could be plenty more assets shifting from preclinical to clinical across the coming 12 to 24 months.We will be updating our subscribers as soon as we know more. For the latest updates on HTBX, sign up below!Disclosure: We have no position in HTBX and have not been compensated for this article.
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