Small/Mid Cap Pharmaceuticals: Non-Hodgkin’s Lymphoma, CAR-T
Pipeline Potential: A
Pipeline Diversity: B
Pipeline Risk: A
Pipeline Competition: B
Financial Security: B
Kite Pharma published their phase 2 CAR-T trial for Non-Hodgkin’s Lymphoma, showing 41% response and 36% complete response in month 6. Given these results, why are investors so excited?
CAR-T (Chimeric Antigen Receptor) is an extremely simple concept; re-engineer a patient’s own cells to fight cancer. Humans have their own immune system fighting to protect the body from harmful substances and the vast majority of the time, it does its job well. In the case of cancer, a patient’s own immune system cannot “detect” the cancerous cells, allowing the cells to grow uncontrollably and damage the body. In the case of this CAR-T, you take out your T Cells, re-engineer them to target the cancerous cells, replant them into the patient’s body and allow the re-engineered T-Cells to target and kill the cancerous cells. Though this is a conceptually simple technique, it is extremely complex procedure and has been tried and failed for many years by many companies. Kite is the only company to have this done this successfully with minimal side effects.
The patients who took Kite’s drug suffered primarily from two types of aggressive B-Cell Non-Hodgkin’s Lymphoma: Diffuse Large B-cell Lymphoma (DLBCL) and Primary Mediastinal B-cell Lymphoma (PMBCL)/Transformed Follicular Lymphoma. The first and primary treatment for the patients with these cancers is chemotherapy. Generally, patients who fail chemotherapy for for this disease do not have much hope of survival or treatment. Kite’s treatment was performed after unsuccessful chemotherapy. Kite’s trials were assessing two types of response: complete response and objective response. A complete response is a complete remission (i.e. “cure”) of the cancer while an objective response is a partial remission to the drug meeting a particular end point. The trials by Kite showed a complete response in 36% of the patients and an objective response in 41% of the patients who took this drug, which is remarkable.
Previous Competitor Trials:
Juno had tried a similar CAR-T technique last year and published results in November under the name JCAR 015 ROCKET. JCAR 015’s CAR-T technique caused deaths in four patients from cerebral edema (excess fluid in the brain). The benefits to the patients were not enough to compensate of the harm, resulting in an indefinite hold placed on this drug. This, understandably, has caused a greater regulatory overlook on CAR-T neurotoxicity.
If granted the NDA, Kite will become first to market for this disease and will immediately become the leading treatment option. Given the number of patients living with this disease, many need this drug immediately and will not be able to wait for further results from Juno’s JCAR 017 and potential approval. Kite’s has also raised an additional $409.7 million through a secondary offering for what I assume is meant to run trials of this drug on other diseases as well as for potential marketing for this drug if approved.
Kite’s treatment was not without its side effects. There were grade 3 or higher adverse affects in a few patients. This included grade 3 or higher cytokine release in 13% of their patients, encephalopathy in 21%, and neurological events in 28%. No cases of cerebral edema were seen, unlike Juno’s ROCKET. Though these side effects can be reversible, they are still worth some precaution. In addition, Kite only looked at 101 patients and they are currently aiming to file for a NDA. NDA’s are usually approved after a test with thousands of patients to assess other confounding effects and drug-drug interaction. Due to the severity of this disease the FDA may still grant this drug an accelerated track, putting it on track for release by end of this year. Another negative comes from increasing competition from Juno’s JCAR 017. JCAR 017 is in an earlier stage but seems to be showing a better efficacy for the patents than Kite’s ZUMA-1.
Anti-CD19 Trial Results:
March 14th 2017, Kite released favorable phase 1 results for their anti-CD19 treatment for NHL. This is another type of CAR-T technique meant for patients relapsing from chemotherapy. These relapsing patients once improved with chemo in the past, but now the cancer is reappearing and is generally more harmful. Though this is simply a phase 1, it showed 73% OR and 55% CR, which are fantastic results. Unfortunately, 55% of the patients showed some form of neurotoxicity, although these effects are reversible. Phase 2 will be a vital step in showing the true potential of this drug.
If ZUMA-1 is approved KITE will be treating hundreds of thousands of patients immediately and will be looking at revenue in the billions. The closest comparison to this drug is Gleevec by Novartis, which was the first to market leading treatment for Leukemia. Gleevec reached annual sales of $5B. NHL and Leukemia have approximately the same number of patients suffering from the disease each year. Kite’s Zuma-1, if approved this year, will become a blockbuster medicine and will follow in similar footsteps to Novartis’s Gleevec. I suspect KITE still has significant room to run on the upside especially if they report favorable results in the 9 mo. time frame and especially if this drug is approved later this year. I value KITE at a potential market cap of $15B which is a 300% upside to current market valuation.
Disclosure: I/we are long KITE.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
*Disclaimer: Always invest with caution, any misstep in early biotech companies such as KITE have huge downside effects to their stock price. We always try to provide you with companies with extremely favorably upside and minimal downside risk.
Analyst: Teja Pathakota
KITE ZUMA-1 Results: http://ir.kitepharma.com/releasedetail.cfm?ReleaseID=1014817
KITE Anti-CD19 Results: http://ir.kitepharma.com/releasedetail.cfm?ReleaseID=1017388
JUNO JCAR 015 Results: http://ir.junotherapeutics.com/phoenix.zhtml?c=253828&p=irol-newsArticle&ID=2225491
JUNO JCAR 017 Results: http://ir.junotherapeutics.com/phoenix.zhtml?c=253828&p=irol-newsArticle&ID=2230895