Biotech Strategy Blog

Commentary on Science, Innovation & New Products with a focus on Oncology, Hematology & Cancer Immunotherapy

At ASCO 2014, one of the posters that attracted a lot of attention was the one from Kite Pharma ($KITE) on their rapid cell expansion (RACE) technology for the production of engineered autologous T cell therapy.

Dr Renier Brentjens at 2012 Chemotherapy Foundation Symposium

As regular blog readers will know, we’ve been following the development of CD19-targeted T cells for the treatment of B cell malignancies such as CLL, ALL and aggressive NHL for some time.

Back in Autumn 2012, at the Chemotherapy Foundation Symposium (CFS) in NYC, more commonly known as the “Greenspan” meeting after the late Dr Ezra Greenspan, we heard presentations on early CAR-T cell data from Dr Renier Brentjens (pictured right) of Memorial-Sloan Kettering Cancer Center (MSKCC) and Dr Michael Kalos from the University of Pennsylvania (Penn).

At ASH 2012, we wrote about the data presented by Dr Carl June in the Ernest Beutler Prize Lecture. Dr Blazar, who jointly received the award, gave this quote from Dr Beutler, which is a reminder of why basic science is worthy of funding, and how important it is to innovation:

“The tendency to merely elaborate on what many others are doing arises, at least in part, from the almost universal misconception that our understanding of nature is profound, that most or all of the basic concepts have already been discovered, and that success in science consists of filling in the blanks with large teams of collaborators.”

What started off as pure academic research, has within a short period of time, become a hot (if not the hottest) area of immunotherapy drug development as inspired by the potential of early data, companies and investors pour money into commercializing CAR-T cell therapy.

Novartis had obtained the exclusive rights to Penn’s CTL019 CAR-T cell therapy in August 2012 at what now seems a bargain price.

Juno Therapeutics was subsequently created with $176M in Series A private equity funding at the end of 2013 to commercialize the CAR-T cell research of Memorial Sloan Kettering in New York and Seattle’s Fred Hutchinson Cancer Research Center.

Last week brought further development with an Initial Public Offering (IPO) from Kite Pharma who have a collaboration with the National Cancer Institute (NCI). Kite said they expected to raise $106M at a share price of $17, which was at the high end of the range. The shares soared 70% in initial trading, and closed at $29 on Friday.

To throw more fuel into the competitive fire, Pfizer have announced the signing of an agreement with French company, Cellectis, to collaborate on the development of their CAR-T cell technology.

In this first of a series of blog posts on gems from the ASCO poster hall, we take a look at the data presented by Kite Pharma and some of the challenges and opportunities the company faces.

Please note this post offers no investment advice and makes no recommendation on whether you should buy or sell shares in $KITE.

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4 Responses to “Kite Pharma Challenges and Opportunities Post-IPO $KITE”

  1. Juan P. Serrate, DVM

    Very nice post Pieter. I wanted to know your thoughts on the likely high cost of goods sold (COGS) and consequently low margins that these products will have once they reach the market. This, among other reasons, was what drove Dendreon to the issues that it’s facing today. Thanks

    • 3NT

      Juan, many thanks for your comment and kind thought.

      I think if CAR-T cell therapy can offer a “cure” or durable long-term remissions over 5 years or more, then companies will be able to charge a premium price that will generate a sufficiently high margin to overcome what is likely to be a high cost of goods sold. There is a possibility that the cost could be compared to that of a SCT, after all, price is what you pay, value (life) is what you get.

      If as a result of the therapy you can forego years of expensive therapy with novel targeted agents, I foresee CAR-T cell therapy being priced in excess of what Dendreon charged.

      Ultimately, it will come down to a cost/benefit analysis, particularly in Europe. Dendreon failed in that market place, and also did not offer a “cure” or long term remission only an incremental improvement of 4 months, so I don’t necessarily think that what happened to them is a case study for CAR-T. Dr Brentjens said at AACR 2014 that he had a patient consigned to hospice care by their previous doctor, only to be put in remission post CAR-T cell therapy and going about their normal life again. That’s priceless and hard to put a value on.

      What will be interesting is to see is whether the leading CAR-T cell players end up with similar efficacy and durability i.e. a class effect, so what will differentiate them could be manufacturing, ease of distribution and it remains to be seen whether “off the shelf” allogeneic therapies work or not. If they do, they could be considerably cheaper to manufacture and sell with a lower COGS.

      It will be fascinating to watch how this market develops over the next few years.

  2. Andrew G

    Why do you believe manufacturing challenges have / will inhibited Breakthrough Therapy designations? I am aware of no statements saying CMC has to be ready for the big leagues in order to grant BT (if anything, public statements have focused on the converse – how to shoehorn in the quality requirements to keep pace with clinical development after granting BT)

    • 3NT

      Good question Andrew, in normal circumstances for the majority of drug development this wouldn’t be an issue. However, this situation isn’t standard – it’s about an academic approach that was tested in a couple of centers outside of routine pharma manufacturing.

      I would look at this differently, if it’s not manufacturing challenges why do you think none of the CAR-T cell therapies have obtained breakthrough status? I’d argue there’s already clinical data out there that shows the potential to change clinical practice and be a breakthrough, so why hasn’t BT designation been granted, presuming some have applied and/or sounded the FDA out?

      One reason that comes to my mind is a reluctance to give this status where the results are based on single academic institution trials where only those institutions have the expertise to produce the CAR-T cells. In other words what could be holding back the grant of the status is the lack of a product that can be scaled up to multi-center trials.

      That’s a challenge of manufacturing. It wouldn’t be an issue in normal drug development, so I’d agree with you that BT status would normally help a company deal with QC requirements etc, but CAR-T cell therapy presents unique challenges in order to go beyond the research setting. That’s why I think we’ve not seen BT status granted. It’s just my opinion, but if you have other reasons why you think it’s not been granted in the face of compelling early clinical data, I’m open to an alternative view point.

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