Improvement in genomic analysis is fueling increased understanding of disease pathology, and simultaneous improvement in gene editing technologies are having massive synergies in development of new breakthrough therapeutics – with completely revolutionary therapeutic modalities.
And Oncology (cancer treatment) is one of the hottest areas where the most innovative technologies are applied – not a surprise that the patients in late lines do not have a lot of options. Within oncology, cell therapy (one of which is CART) is particularly promising area of research and development going forward and everyone expects CART (although may not be in the current form) would be the future of oncology care.
As a brief introduction, CART is an acronym for Chimeric Antigen Receptor T-Cell. T-cell plays a critical role in identification and apoptosis (cell death) of cancer cells, and in many cases, cancers have developed ways to avoid detection by T-cell. Current CAR-T technology edits patients’ own T-cell cells such that they can then recognize cancer cells again, allowing patients’ own immune system to destroy cancer cells.
Below diagram is a great illustration of gene editing process.
As shown below, the current CART is autologous – meaning that the patients’ white blood cells are extracted from patients (apheresis), T-cells are isolated and edited, and lastly, the edited T-cells are re-infused back into the patients – truly revolutionary. During clinical trials, the entire process took 17 days on average, but the process is not scalable and had led to very high price for these products.
This therapy is highly revolutionary and breakthrough for two main reasons
1. CART therapies have much higher response rate than other options
2. The therapy is technically not a drug, but cells – therefore, they continue to divide in human body and remain in circulation – leading to durable and deep response.
Cell therapy is one of the most promising therapeutics in pharmaceuticals industry for both medical and financial reasons.
Medical reason
As mentioned above, the combination of high response rate with durable, deep response is the holy grail for both physicians and patients. Currently, CART is limited to hematological cancers, but there is no doubt that improvement in technology will allow entry into solid tumors – which represent much bigger market / commercial opportunity.
Financial reason
All innovative biotech companies have one issue – how do we replace the cashflow cliff when blockbuster drug loses its exclusivity? The companies inevitably become victims of their own success. However, there would not be this kind of risk with cell therapies. As noted above, cell therapies are not “drugs” in the technical sense and there is no FDA guidance on development of bioequivalent cell therapeutics. At the same time, these process is the product for cell therapies – rendering the term “bioequivalence” (which is critical for generic/biosimilar development) essentially irrelevant. As the products launch successfully, generate more data, and gain more comfort from physicians, the revenue will continue to increase and there would be no risk for generic / biosimilar entry for these products. What happens to the multiples of companies whose cashflows are expected to grow predictably with little competitive pressure? It only goes UP.
However, current form of CART has a critical problem – they are autologous – meaning patient’s own T-cells are used for the drug. The first gen CART therapies are led by Gilead/Kite, Novartis, and Bristol/Celgene/Juno – but they are all autologous and that comes with significant burden – 17 day could be too long for end-stage patients (fragile patients must remain immuno-compromised state) and the cost is too high as it is personalized for each patients.
The solution is the allogeneic CART – you no longer use patients’ own T-cells, but you use healthy volunteers’ T-cells. The cells are already edited, products are ready to be infused. Below chart shows clear benefit of allogeneic CART over autologous CART. Core benefit is significant reduction in time and cost – this allows much greater market entry.
Geographic expansion of TAM (total addressable market) is particularly exciting. Because of technical and potential risk effect complications, 1st generation CART required skilled medical staff and sophisticated medical center – on top of FDA-certified gene editing facility. Therefore, it was limited to very few developed markets. However, 2nd gen CART is free from both – which would allow much much more patients to benefit from this revolutionary therapeutics.
So.. what allogeneic CART is the way for the future… what is the most promising developer of 2nd gen CART? My money is on Allogene
In theory, 2nd gen CART is REALLY SEXY, and the tough part is the execution, which requires the top-notch management team with the best track record in this space. At the same time, they will need patient, long term minded investor base to support them through difficult times as they are attacking very difficult problems.
Allogene has both – best-in-class management team and long-term oriented investor base
Allogene is led by top class management team that sold Kite Pharma for over $10bn to Gilead even before the product was launched. Dr. Arie Belldegrun and Dr. David Chang are the pioneers in CART development – they came on top of the first generation CART race, beating out Novaris and Juno. After acquisition by Gilead, many key leaders from Kite also jumped to Allogene, following the foot steps of the two pioneers.
At the same time, Allogene core shareholder base includes not only long-term oriented investors, but also key strategic investors that can serve as potential acquirer of Allogene down the road
Given the best-in-class management team, it is not a surprise that they were able to attract top-class investor base.
On the financial investor side, TPG holds 13% of share – TPG founder David Bonderman made a lot of money with Kite transaction and now he brought in TPG alongside his own family office to invest in Allogene.
On the strategic investor side, Pfizer and Gilead hold 16% and 5% respectively. The two leaders (Drs. Belldegrun and Chang) respectively hold 3% and 4%. At the same time, Seaview Trust is Arie Belldegrun’s investment firm.
They amount to a total of 47% ownership by insiders – this is very very rare and represents strong confidence.
Allogene is actively investing in its platform to expand its pipeline opportunities
Kite was acquired by Gilead for over $10bn, but Allogene’s current market capitalization is below $5bn. At the same time, the prospect for Allogene now seems brighter than the prospect for Kite at the time of acquisition by Gilead.
Key attraction remains that Allogene would be my horse to back in a space that is bound to expand rapidly as the entire class gets closer to the standard of care. I hope that Allogene and other innovators all make it to the finish line to save more patients lives.
Note: not investment advice – only presents personal opinion.
