Novartis Turns To Xencor For CAR-T Backup

| About: Novartis AG (NVS)

Novartis' (NYSE:NVS) move into bispecific antibodies has given Xencor, a low-key US biotech that until now was best known for technology alliances, its biggest windfall yet.

This morning’s deal between the two companies will supplement Novartis' CAR-T offering, and could even give it a backup plan. Still, for Xencor the $150m up-front fee is not unencumbered, and much of it will be swallowed up in development costs. But it strongly endorses Xencor’s approach, and is considerable given that this is a preclinical deal in which the US is not the main focus.

Rather, Novartis is picking up ex-US rights to two of Xencor’s bispecific MAbs – XmAb13676 for B-cell malignancies like chronic lymphoblastic leukaemia and XmAb14045 for acute myelogenous leukaemia. Both are expected to enter clinical trials this year.

Blincyto mirror

Thus Novartis is expanding its oncology offering to include a strategy mirroring Amgen’s (NASDAQ:AMGN) Blincyto, the first bispecific MAb to gain US approval.

Bispecifics comprise two binding regions, one of which binds the desired antigen on tumor cells, and the other CD3 on effector T cells. The idea is to bring T cells into close proximity with the target, to form an immunological synapse and bring about cell-mediated lysis.

This is similar to the effect of CAR-T cells, but it is much simpler: rather than the product comprising a whole T cell it simply brings existing T cells into play. Bispecifics represent a competitive threat to CAR-T, so it makes perfect sense for Novartis to have a presence in both (EHA – CAR-T has Blincyto breathing down its neck, June 13, 2016).

The Swiss group’s purchase of ex-US rights for Xencor’s products could indicate that it might see a somewhat limited future for CAR-T beyond the US. Then again, perhaps Xencor drove a hard bargain to retain US rights knowing that Novartis was desperate for its technology.

XmAb13676 targets CD20, the same antigen as Rituxan and Arzerra, two standard MAbs available for CLL; XmAb14045 hits CD123, a protein that Fortress Biotech and Cellectis will be targeting with CAR-T. Other anti-CD123 bispecifics include Johnson & Johnson (NYSE:JNJ)/Genmab’s (OTCPK:GMXAY) JNJ-63709178 and Servier/Macrogenics’ (NASDAQ:MGNX) MGD006.

Non-oncology leads

Interestingly, however, the two MAbs licensed to Novartis are not Xencor’s lead assets. That honor belongs to two clinical-stage projects, XmAb5871 for lupus and XmAb7195 for allergic disease.

However, at an analyst meeting today Xencor said it would now increasingly focus on the oncology bispecifics. The company has previously done technology access deals with Novo Nordisk, Merck & Co (NYSE:MRK) and CSL (OTCPK:CSLLY), and partnered with Amgen for the anti-CD38 bispecific XmAb13551, and with Morphosys for the anti-CD19 MAb XmAb5574/MOR208.

Xencor has not specified how much of the $150m up-front Novartis fee would have to be spent on development, but it will initially be on the hook for half the cost of a 60-patient trial of XmAb14045 and 65-patient study of XmAb13676. Before today the group had raised $240m in equity since being founded in 1997, including $72m in a Nasdaq IPO in December 2013.

Since the float its stock has climbed by over 60%, though this encompasses a 50% fall from its high at the peak of the biotech boom a year ago. The $150m will add to first-quarter cash of $92m, and at least Xencor now knows that it has enough to last well into the biotech downturn.

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