Here's How Heat Biologics Inc (NASDAQ:HTBX) Needs To Use Its Cash to Justify The Raise

Heat Biologics Inc (NASDAQ:HTBX) has been a roller-coaster of a ride over the last six months or so. The company ran up into late 2016 in anticipation of some data from its lead bladder cancer trial, but basically collapsed when the data hit press and the drug failed to show any degree of benefit over placebo in a phase II trial.A month or so later a new CSO signed on, and we interpreted this as a signal that the company was focusing on the bringing of some of its lower pipeline towards later stage development. Since then, however, the stock has fluctuated in and around the $0.85-90 range.Then, during the last couple of weeks, the volatility picked up again. Heat put out some data from a lung cancer combination study mid March, and the company gapped up to the tune of 33% on the news. The gains didn’t last however, as Heat's run depleted during the subsequent week or so, before recovering slightly only to take a big hit at the end of last week on the news that the company has priced a 5 million share equity issue at $0.80, in an attempt to raise around $4 million in operational capital.As things stand, Heat shares go for a little over $0.85, for a market capitalization of circa $23 million.The raise isn’t great, and shareholders are getting diluted, but there's a flip side. If the company can put the capital to good use (and we'll define good use in a moment) then there's some real upside potential on the $23 million figure.For those new to the company, it's developing some oncology candidates that it's trying to bring to market both as monotherapies and as potential candidates for combination with some current standards of care in the space. For us, it's the combination targets that are the real value drivers, and it's these that we see as providing the near term catalysts that could spark a revaluation.So, good use.Management has stated that it's looking to use the capital to:

"… continue to fund its and its subsidiaries’ preclinical and clinical programs, for working capital and general corporate purposes, as well as to acquire, license or invest in complementary businesses, technologies, product candidates or other intellectual property."

That's all great, and the Pelican acquisition (or re-acquisition is maybe more appropriate) is an example of the acquisition side of this strategy. The company basically acquired and received a $15.2 million grant from the Cancer Prevention and Research Institute of Texas in its Pelican buyout, so there's some real potential for value add there. It's not what we're focusing on, however.What we want to see that capital put towards is getting the HS-110 into a registration trial as soon as possible.The drug is currently in a combination study with Bristol-Myers Squibb Co (NYSE:BMY)'s Opdivo, and the data we mentioned above suggests that the combination is safe, and more interestingly, could have some real clinical benefit when it's used in conjunction with Opdivo in non small cell lung cancer patients (NSCLC). The drug works by raising what's called tumor infiltrating lymphocyte level, and through the increase of this level, essentially magnifying the impact that the anti PD1 checkpoint inhibition caused by Opdivo has on the lung cancer tumor cells. It's now in the second part of a phase II trial, the date from which should serve to underpin advance into a registration combination study.If the early clinical benefit we’ve just seen can translate to a larger patient sample, and underpin registration as a combination asset, then there's a good chance this drug could become first line as a combo in the up to 80% of lung cancer patients for which Opdivo has limited efficacy as a monotherapy.So we're looking for this cash to drive the completion of the current study, and for the data from this study to really get the company's share price running as Heat moves into a pivotal with 110.Don't take anything for granted. We saw similar early clinical benefit indicators (although not quite to the same degree) in the bladder cancer trial, which subsequently failed. That said, the early data looks stronger here, and this is a program that could change the game for Heat if it's even mildly successful.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 any of the securities mentioned and have not been compensated for this article.