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Summary

  • KITE is a clinical-stage biopharmaceutical company focused on the development and commercialization of novel cancer immunotherapy products.
  • As of March 13, 2014, the objective response rate of the 22 evaluable patients in the NCI (National Cancer Institute) Phase 1-2a clinical trial was 86%.
  • As of March 13, 2014, 16 of the 24 treated patients were in remission.

Based in Santa Monica, CA, Kite Pharma (NASDAQ:KITE) scheduled a $78 million IPO on the Nasdaq with a market capitalization of $474 million at a price range midpoint of $13 for Friday, June 20, 2014.

Note: Price ranged raised to $15-$16, conclusion the same.

The full IPO calendar is available at IPOpremium

SEC Documents

Manager, Joint managers: Jefferies, Credit Suisse, Cowen and Company

Co-Manager: Stifel

End of lockup (180 days): Wednesday, December 17, 2014

End of 25-day quiet period: Tuesday, July 15, 2014

Summary

KITE is a clinical-stage biopharmaceutical company focused on the development and commercialization of novel cancer immunotherapy products designed to harness the power of a patient's own immune system to eradicate cancer cells.

As of March 13, 2014, the objective response rate of the 22 evaluable patients in the NCI (National Cancer Institute) Phase 1-2a clinical trial was 86%.

Objective response occurs when there is a complete remission or a partial remission, as measured by standard criteria.

As of March 13, 2014, 16 of the 24 treated patients were in remission.

Valuation

Glossary

Valuation Ratios

Mrkt Cap (MM)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

.

Kite Pharma

$473

no rev

-38

3.4

3.4

16%

Conclusion
The rating on KITE is a buy.

KITE has a strong collaboration with the National Cancer Institute, very good initial trial results and seems reasonably priced at 3.4 times book value.

The price-to-earnings ratio is -38, which indicates a relatively low cash burn rate to the market cap.

Insiders have indicated an interest in purchasing $30 million on the IPO, or 38%.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Business

KITE is a clinical-stage biopharmaceutical company focused on the development and commercialization of novel cancer immunotherapy products designed to harness the power of a patient's own immune system to eradicate cancer cells.

KITE does this using its engineered autologous cell therapy, or eACT, which it believes is a market-redefining approach to the treatment of cancer.

Lead product

KITE's lead product candidate, KTE-C19, is an anti-CD19 CAR T cell therapy. CD19 is a protein expressed on the cell surface of B cell lymphomas and leukemias. KITE is funding an ongoing NCI (National Cancer Institute) trial.

KITE collaborates with the National Cancer Institute.

Phase 1-2a clinical trial utilizing anti-CD19 CAR T cell therapy that is designed to establish a dose level and appropriate conditioning regimen, as well as to assess overall safety, in patients with B cell lymphomas and leukemias that had been heavily pretreated and were relapsed/refractory (unresponsive) to chemotherapy.

KTE-C19 will use the identical anti-CD19 CAR construct and viral vector that is being used in the NCI trial.

However, KITE believes it has streamlined and optimized the NCI's manufacturing process of anti-CD19 CAR T cells for the KTE-C19 product candidate.

On December 12, 2013, KITE entered into an exclusive, worldwide license agreement, including the right to grant sublicenses, with Cabaret Biotech Ltd., or Cabaret, and its founder relating to intellectual property and know-how owned or licensed by Cabaret and relating to CAR constructs that encompass KTE-C19.

While KITE is funding the NCI trial pursuant to the CRADA, KITE does not expect to license intellectual property relating to KTE-C19 from the NIH.

Response rate

As of March 13, 2014, the objective response rate of the 22 evaluable patients in the NCI Phase 1-2a clinical trial was 86%.

Objective response occurs when there is a complete remission or a partial remission, as measured by standard criteria.

Generally, a complete remission requires a complete disappearance of all detectable evidence of disease, and a partial remission typically requires at least approximately 50% regression of measurable disease, without new sites of disease.

As of March 13, 2014, 16 of the 24 treated patients were in remission.

Three of the 16 patients later experienced disease progression after their first treatment and subsequently reestablished remission after a second course of treatment and remain in remission. Severe and life threatening toxicities occurred mostly in the first two weeks after cell infusion and generally resolved within three weeks.

eACT

eACT involves the genetic engineering of T cells to express either chimeric antigen receptors, or CARs, or T cell receptors, or TCRs.

These modified T cells are designed to recognize and destroy cancer cells. KITE currently funds a Phase 2 clinical trial of a TCR-based therapy and multiple Phase 1-2a clinical trials with CAR- and TCR-based therapies that are each being conducted by its collaborator, the Surgery Branch of the National Cancer Institute, or the NCI.

In an ongoing clinical trial, patients with relapsed/refractory lymphomas and leukemias treated with CAR-based therapy experienced an objective response rate of 86%.

KITE plans to conduct a Phase 1-2 clinical trial in 2015 for its lead product candidate KTE-C19, a CAR-based therapy, in patients with relapsed/refractory diffuse large B cell lymphoma, or DLBCL.

If KITE believes the data are compelling, KITE plans to discuss with the U.S. Food and Drug Administration, or FDA, the filing of a Biologics License Application, or BLA, for accelerated approval of KTE-C19 as a third line therapy for DLBCL.

Immuno-oncology

Immuno-oncology, which utilizes a patient's own immune system to combat cancer, is one of the most actively pursued areas of research by biotechnology and pharmaceutical companies today. Interest and excitement for immuno-oncology is driven by recent compelling efficacy data in cancers with historically bleak outcomes and the potential to achieve a cure or functional cure for some patients.

KITE believes eACT presents a promising innovation in immunotherapy.

eACT has been developed through KITE's collaboration with the NCI, where the program is led by Steven A. Rosenberg, M.D., Ph.D, a recognized pioneer in immuno-oncology.

KITE's Founder and Chief Executive Officer, Arie Belldegrun, M.D., FACS, in addition to his prior roles at Agensys, Inc. and Cougar Biotechnology, Inc., also has significant experience in this field dating back to his time at the NCI as a research fellow in surgical oncology and immunotherapy with Dr. Rosenberg.

The patient's immune system, particularly T cells, is thought to play an important role in identifying and killing cancer cells.

eACT involves modifying a patient's T cells outside the patient's body, or ex vivo, causing the T cells to express CARs or TCRs, and then reinfusing the engineered T cells back into the patient. CARs can recognize native cancer antigens that are part of an intact protein presented on the cancer cell surface.

TCRs broaden the therapeutic approach by recognizing fragments on the cancer cell surface derived from intracellular proteins.

By combining both CAR and TCR approaches, KITE has the potential to generate a broad portfolio of products that can target both solid and hematological tumors.

Dividend Policy

No dividends are planned.

Intellectual Property

Well before the field of adoptive T cell immunotherapy raised commercial interest and started its transition to an industrial environment, KITE initiated a process of identifying patents with broad coverage in the area of CARs.

Between 2009 and 2013, KITE identified, and ultimately licensed, issued patents with broad claims directed to the CAR concept.

These patents were originally filed by investigators at the Weizmann Institute of Science, the NIH, University of California San Francisco, or UCSF, and Cell Genesys.

As the ownership of some of these patents was complex and shared by multiple institutions, it took a significant interval of time and effort for KITE to complete its exclusive licensing. This process was finalized in December 2013.

This effort was paralleled by the creation and execution in August 2012 of the CRADA.

Competition

Due to its promising clinical therapeutic effect in clinical exploratory trials, KITE anticipates substantial direct competition from other organizations developing advanced T cell therapies.

In particular, KITE expects to compete with (1) therapies with tumor infiltrating lymphocytes, or TILs, that are naturally occurring tumor-reactive T cells harvested, propagated ex vivo and re-infused into patients; and (2) therapies with genetically engineered T cells, similar to eACT, rendered reactive against tumor-associated antigens prior to their administration to patients.

TIL therapy and genetically engineering T cells are being pursued by multiple companies, including Adaptimmune LLC, Celgene Corporation (in collaboration with bluebird bio, Inc.), Lion Biotechnologies, Juno Therapeutics, and Novartis.

In particular, Novartis and Juno Therapeutics are in the process of research and development of their own version of an anti-CD19 CAR T cell therapy and KITE expects Adaptimmune to compete with any TCR-based product candidates that KITE develops.

In addition, some companies, such as Cellectis, are pursuing allogeneic T cell products that could compete with eACT.

5% stockholders

Arie Belldegrun, M.D., FACS 22.5%

David Bonderman 9.2%

Pontifax (Cayman) II L.P. 8.5%

Alta Partners VIII, LP 8.3%

Commercial Street Capital 7.3%

Ran Nussbaum 8.6%

Steven B. Ruchefsky 8.2%

Use of proceeds

KITE expects to net $70 million from its IPO. Proceeds are allocated as follows:

  • $16.0 million to fund the planned Phase 1-2 single-arm multicenter clinical trial of KTE-C19 in patients with DLBCL who have failed two or more lines of therapy;
  • $30.0 million to fund additional trials for other indications for KTE-C19;
  • $10.0 million to fund the advancement of any additional product candidates that KITE selects;
  • $5.0 million to expand its internal research and development capabilities to explore the next generation of eACT technology and new product candidates; and
  • the balance to fund working capital, including general operating expenses.

Disclaimer: This KITE IPO report is based on a reading and analysis of KITE's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: Kite Pharma