JCAR-014

Gilead’s $12B Bet Pays Off in Two Months After the CAR-T is a hot new area and there are companies hot on Gilead’s tail, namely Juno, in a partnership with Celgene, and Novartis. In late August, Gilead Sciences bought Kite Pharma for $11.9 billion. Not long after, the U.S. Food and Drug Administration (FDA) approved the companies’ CAR-T therapy, Yescarta (axicabtagene ciloleucel). For the most part, despite some concerns by investors that the price was too expensive, they seemed to think it was a good deal. But CAR-T is a hot new area, and there are other companies hot on Gilead’s tail, namely Juno Therapeutics , in a partnership with Celgene , and Novartis . Biotech Phoenix, writing for Seeking Alpha, takes a look at the companies’ strategies. Kite/Gilead, he notes, “took the CD19 CAR-T product and protocol that was already largely developed by NCI and focused on doing the work needed to get it quickly approved for use in DLBCL (and a host of other B-cell malignancies). To do this, they developed the commercial manufacturing and moved directly to registrational studies (ZUMA-1) to get Axicabtagene-ciloleucel (KTE-019) approved as quickly as possible.” Novartis’ strategy is similar. Its CLT019 product and protocol were primarily developed at the University of Pennsylvania and focused on commercial manufacturing and registrational studies in pediatric ALL, with DLBCL running, possibly, behind it. Phoenix notes, “There are benefits to this type of strategy. The first is less developmental risk since proof of concept for the products and protocols had already largely been established by the NCI and UPENN. The other is getting to market faster also means generating sales and profits quicker as well as additional time to get physicians comfortable with these new products.” The downside is that less time was spent on making the products better. The emphasis was on getting to market first. Juno, on the other hand, chose a multi-product strategy, trying to better understand the science and to optimize its CD19 CAR-T platform. This is more typical of a small biotech than it is of big pharma. Understanding the science better tends to derisk the entire endeavor somewhat. Most of Juno’s CD19 CAR-T tech was developed by the Fred Hutchinson Cancer Research Center . “However,” Phoenix writes, “unlike Kite/Gilead and Novartis, Juno took existing technology from Fred Hutchinson and spent a lot of time and resources experimenting with different products (JCAR014, JCAR015, and JCAR017), treatment protocols and manufacturing processes trying to figure out how to make the best possible product.” The downside is it meant they weren’t first to the market and as a result, won’t be bringing in revenue for a while. It should also be pointed out that Juno’s first program, JCA015, was abandoned after several patient deaths. In that respect, you could argue that Kite and Novartis learned from Juno’s mistakes. You could also argue that rather than multiple approaches as a best-in-class approach, Juno was merely hedging its bets by having multiple compounds in the same area. The advantage to Juno’s approach is it has the possibility of kicking Kite/Gilead and Novartis out of the top spots if its product is significantly better than the competition. On the surface, anyway, Gilead/Kite’s and Novartis’ products seem to have similar efficacy and safety values, while Juno’s appears to be better, although there isn’t really enough data to make that statement completely, and Juno still has more data coming in. It’s hard to say yet how it will all shake out, and it might be possible that each company will find an indication they can dominate. Phoenix writes, “Gilead/Kite and Novartis have executed a ‘first to market’ strategy to establish themselves as the current leaders in CD19 CAR-T space. In contrast, Juno has taken a ‘best in class’ approach that, despite early stumbles, may finally be starting to show promise based on recently released data. Based on my estimates from valuing Juno under various scenarios, it appears that the market has yet to reflect much of the potential upside. I believe this presents an attractive balance of upside-downside risk relative to current market expectations.” Chances are, the upcoming American Society of Hematology (ASH) meeting in December will release more data, especially from Juno, that will influence these companies’ stocks.