Investment Thesis and Topic:
There have been many gene therapy companies which have arisen over the past decade to treat beta-thalassemia. This devastating illness results in very high lifetime costs (upwards of $1 million) and an estimated 60,000 patients which currently have a complicated series of life-long regimens with no cure. In the absence of a cure, science has attempted to respond with gene therapeutics - providing the correct gene in the patient's cells or correcting the genetic defect via genome modifications (we'll explain the difference). Although many biotech investors have their preferred stocks, it is important to look beyond the known science and compare it to others in the field to determine the strongest prospects. Additionally, there are companies which are continuing to study treatments which are not curative, but may significantly improve the lives of those affected in the absence of a cure, which may move the goal-posts for pricing and quality of life improvements. Herein we discuss the potential therapies being developed by Bluebird Bio (BLUE), Celgene (CELG)/Acceleron Pharma (XLRN), Kaidis Pharma (Euronext Amsterdam and Brussels: KDS), Sangamo Therapeutics (SGMO), CRISPR Therapeutics (CRSP)/ Vertex (VRTX) and Editas Medicine (EDIT) in the editing space as well as LaJolla Pharmaceutical (LJPC), Global Blood Therapeutics (GBT) and Protagonist Therapeutics (PTGX) as companies developing treatment (non-curative) methods. We will provide opinions on the scientific underpinnings and the potential for the companies in the space.
Due to the length and complicated analysis required to properly analyze these companies, we will be providing this research as multiple articles. We will start the subsequent article with a brief version the same information so that readers don't feel the need to juggle back and forth.
Disease Underpinnings and Prevalence:
Image generated by the Thallasemia Society of NSW.
ß-thallasemia is an autosomally recessive collection of diseases related to the hemoglobin A gene, known as HBB, located on chromosome 11. Mutations of HBB are primarily caused by insertions, often congregating near the promoter region (prevents expression), or deletions (destroying key regions of the protein) which cause debilitating and life-threatening illness by decreasing production of functional hemoglobin. This reduction of hemoglobin is based on its structure and hemoglobin A, a tetrameric protein (has 4 subunits), which depends on 2 alpha and 2 beta subunits in adults to function. Patients with ß-thallasemia either produce a reduced amount of beta hemoglobin or none at all, thereby reducing the total amount of functional hemoglobin A. Hemoglobin A is responsible for 96% of the weight of functional red blood cells, which are turned over in the body rapidly, with an average life span of ~ 4 months. With this rate of turnover, it's essential that sufficient amounts of beta hemoglobin are sustainably present in the body, which is why symptoms tend to be persistent and why the lifetime costs associated with the disease are so high.
The most common symptoms of ß-thallasemia are relatively minor sounding on the surface: fatigue, weakness, pale or yellowish skin but can also include more severe effects such as bone deformities, spleen complications and slowed growth. These symptoms are indications of potentially more significant risks associated with the disease including heart complications, infection and iron overload. Treatment to prevent these complications is varied, but limited. The longest running treatment is repeated blood transfusions, these do cause iron build-up over time and may cause damage to associated internal organs. There currently is one listed cure for the disease: allogeneic haematopoietic stem cell transplantation (HSCT), which require haplotype matching and can be rejected.
Blood from a ß-thallasemia patient showing the weakened red blood cells generated by "Pathology Student" Kristine Krafts MD.
The lifetime costs associated with severe ß-thallasemia ranging upwards of $1 million dollars per patient, with 60,000 - 75,000 ß-thallasemia affected births annually (estimated based on CRSP presentation and gene frequency respectively)- this cost will be important in pricing and establishing a potential market. This disease is significantly more prevalent amongst the developed world with upwards of 19% of individuals of some European countries carrying some mutation associated with the disease. The primary point here is that this disease is more common in countries where there is pricing power and strong healthcare programs which can support the marketing of potential therapies.
Recently, there has been a renewed effort to cure this disease without the need for complicated HSCTs, using genome editing and gene therapies. Targeting of the HBB gene to correct mutations is complicated, and each patient can be expected to have variations which would require genetic testing and modulation of the protocol for each patient. How each of the companies vying to produce a more efficient cure respond to this complication is part of what makes the field so interesting - there are many ways to do it.
These two companies have strong offerings in many spaces, but their therapeutic research in beta thalassemia is our focus here (so we're not commenting on their wider investment potential). With market caps of $83.52 billion (Celgene) and $39.1 billion (Vertex) these companies provide significant capital and stability behind their research project - although these companies do not have the products directly (these are partners with XLRN and CRSP respectively) they look to receive the bulk of the proceeds from success of their partnered therapies. They have taken different approaches with who they support, and this provides a primacy advantage to CELG, but stronger long-term momentum to VRTX.
Celgene and their smaller partner Acceleron (market cap of $1.6 billion) are currently in Phase III trials of their protein, Luspatercept, designed to treat chronic anemia and reduce red blood cell [RBC] transfusion burden. This BELIEVE trial has a single primary endpoint:
Proportion of subjects with hematological improvement from Week 13 to Week 24 compared to 12-week prior to randomization
Hematological improvement is defined as ≥ 33% reduction from baseline in red blood cell count transfusion burden with a reduction of at least 2 units from Week 13 to Week 24 compared to the 12-week. Reported as the Number of RBC units transfused from Week 13 to Week 24, and in the 12 weeks prior to randomization.
They have just shy of 2 dozen secondary endpoints listed, with the majority surrounding the reduction in transfusion burden, iron build-up and its effects on various organ groups. How this reads to us is that the main focus is the ability to reduce transfusion requirements, and the majority of secondary endpoints are dependent on this, rather simple - which can be a good thing. XLRN does this by encouraging proper red blood cell maturation, which has been demonstrated in a clinical setting.
Images from Acceleron Pharma.
This ability to prevent erythroid apoptosis (cellular death) is the key function of Luspatercept, and it does this well. Being able to improve overall hemoglobin levels in patients is a critical part of promoting proper RBC development. This effect is effective over a 24 month period in patients who are anemic, but do not require transfusions.
These ß-thallasemia patients also saw an improvement over their anemia related symptoms, an important factor for patients continuing therapy - as they are more encouraged by the feeling of physical improvement.
More important, however, is that Luspatercept also drastically improves RBC formation in transfusion dependent patients. This is measured by a reduction in total transfusions required by a treated patient over the course of the treatment. The average response was a 33% reduction in total transfusion requirements, but there were a large number of patients who saw a more significant decrease in transfusion requirements.
With this data in hand, XLRN and CELG have begun a double-blind placebo controlled Phase III trial, BELIEVE, which will enroll 300 patients in a 2:1 ratio with the primary endpoint (listed above) as a reduction of 33% in transfusion burden appears to be achievable. Side effects reported in Phase II trials were minimal, with no significant adverse events which may slow or delay the proceeding of the Phase III trial. In seeing the potential for strong success, this early clinical data suggests that Luspatercept should see a strong response from patients with transfusion dependent ß-thallasemia patients which may provide an alternative therapy in the near term.
VRTX/CRISPR Therapeutics (NASDAQ:CRSP)
Vertex and their partner CRISPR Therapeutics are currently in the back-seat of the clinical trials for ß-thallasemia with an expected Phase I/II start date for their therapy in early 2018. Although significantly behind CELG/XLRN in their time frame, VRTX/CRSP offer a novel therapy - a curative treatment using genetic editing of the patient's cells with the newly developed CRISPR-Cas9 system.
Clustered Regularly Interspaced Palindromic Repeats - CRISPR's discovery in 2007 and demonstration that and associated protein, Cas9, have been heralded as cheaply customizable via a newly developed short RNA sequence (crRNA/tracrRNA chimera) which provides a means to edit genomes in eukaryotes in 2012. Cas9 can be provided any 20 nucleotide RNA, called a guide-RNA (as part of a larger chimera), matching an identical genome sequence adjacent to a nucleotide combination of NGG. Cas9 then utilizes RNA/DNA targeted interactions to identify and allow the protein to cleave DNA as a double stranded blunt end. With regard to Cas9's safety for clinical trials, we've previously provided this commentary:
Being a novel method for modification of the human genome, significant detail has been given to the safety and efficacy profile of Cas9. In short, there is no consistent safety and efficacy profile across all Cas9 treatment methods due to subtle variations in currently poorly understood gRNA behaviors. Although this may sound absurd, the primary means to determine the profile of each CRISPR-Cas9 treatment is by analyzing the behavior of the protein and its associated gRNA in vitro, ex vivo and finally in vivo. Early profiling of Cas9 accuracy and fidelity using whole genome sequencing suggested that the protein is not 100% efficient at cutting its desired target, but that off-target risks were very low. This led to a significant amount of excitement, as it implied that we had found a trustworthy means for rapidly customizable genome manipulation. Excitement abound, a few key scientists deeply involved in the patent battle began to form companies to utilize this revolutionary genome modification tool as a method to create therapies to treat the untreatable: inherited genetic disease.
As we have also commented, this early excitement was hit by concerns about off-target risks which were not previously detected. These risks were able to be more specifically analyzed when GUIDE-seq was produced:
GUIDE-Seq was presented by Keith Joung's group out of Harvard - and one of the founding members of Editas Medicine . GUIDE-Seq provided an accurate in vivo method to rapidly assess the risk of off-target activity of Cas9 by analyzing cut sites directly.
With these tools in hand, VRTX and CRSP have developed a tool for rapidly editing the genome of patients to attempt to cure genetic disease. In ß-thallasemia their means for correcting the disease is not based on correcting the errors inherent to patients. The types of mutations and exact locations are highly varied, and therefore make true personalized therapies prohibitively expensive. CRSP looks to activate a native fetal hemoglobin to replace the depleted levels of ß-hemoglobin in ß-thallasemia patients. This fetal (γ) hemoglobin is deactivated in our youth but is capable of providing the same role as ß-hemoglobin when activated.
Fetal hemoglobin production rapidly declines following birth (0 above) and is replaced by ß-hemoglobin. If this fetal hemoglobin is provided to replace the ß-hemoglobin the symptoms of ß-thalassemia rapidly decrease and are correlated with the % of γ-hemoglobin in the system.
With this simplistic solution to ß-thallasemia available, CRSP has designed a disruptive gene editing process, CTX 001 to reactivate this fetal hemoglobin in ß-thallasemia patients to provide a cure. This is done by extracting patient blood samples and editing CD34+ cells prior to reintroduction into the patient. This ex vivo editing allows for confirmation of proper editing and screening for any potential risks outside of a patient before returning the corrected cells, providing an additional checkpoint for patient safety. Early data used in support of their IND was exciting and demonstrated that they were able to efficiently edit the ß-hemoglobin enhancer to decrease protein synthesis via reduced transcription, and promote γ-hemoglobin synthesis.
In CD34+ edited cells CRSP was able to demonstrate that they dramatically increased the overall γ-hemoglobin concentration in the cell in relation to ß-hemoglobin, which is especially dramatic when analyzed against the ratio in unedited colonies. This appears to be efficiency dependent, with bi-allelic edited cells producing more γ-hemoglobin, but significance was not established. It is clear that this is the desired outcome, and it is expected the CRSP will continue to drive this as the ultimate result of their editing, and may be a screening requirement for ex vivo culture prior to reintroduction to increase the likelihood of success. In patient samples they have seen a strong response to editing, which does not have to bring a patient to a complete restoration of normal hemoglobin levels to become asymptomatic.
The most exciting aspect of this editing, in addition to its potential in curing a complex and debilitating disease is that this cure appears to be long-term and stable (not just an extended treatment). CRSP has been able to demonstrate that the CD34+ cells that they are correcting (stem cells that differentiate into all different types of blood cells) are stable and that these edited lines maintain these edits even in their differentiated cell types - suggesting a highly stable treatment. This is very promising moving forward and should excite the field as they prepare to potentially see data from these clinical trials in the upcoming year.
The Third Large Player: BlueBird Bio (BLUE)
BlueBird Bio has been a rapid up-and-comer in the field of genetic engineering, with a market cap of $7.8 billion, they represent one of the largest companies directly tied to the gene therapy space. Their platform for ß-thallasemia therapeutics combines two different technologies, human stem cell transplants - an established treatment method for ß-thallasemia, and genetic engineering via lentivirus into a single treatment: HGB-207. They currently have 2 Phase III studies underway (Northstar 3 just started dosing) with primary data expected by 2020/2021. BLUE takes the middle road between CELG/XLRN and VRTX/CRSP by editing a patient's stem cells via a lentivirus and then reintroducing them into the patient for treatment. This editing is done by providing the vector with a correct (but identifiable) version of the adult hemoglobin within it and transfecting cultured patient cells with it. These cells are then transfused back into the patient where they are able to establish themselves without risk for GvHD.
Early data on the effectiveness of this treatment has been impressive:
This figure, generated by Marina Cavazzana-Calvo et. al in Nature, depicts the cellular response to lentivector transfection. Prior to transfection the patient's normal hemoglobin levels are predominantly the normal hemoglobin A. This transitions to an increased level of fetal hemoglobin and the modified HbAT87Q following treatment. This increase in HbAT87Q (seen in C) is correlated with an increased stability in the patient's hemoglobin levels (seen in A) which continue to improve to the end of the measured time (3 years).
The largest point of excitement for BLUE over their two listed competitors here are that they already have data being produced for their Phase III trial for a curative treatment (cure is greater than treating symptoms (XLRN), Phase III is obviously further along than pre-Phase I/II (CRSP), which they announced over the summer:
|Patient 1||Patient 2||Patient 3|
|DP VCN in each drug product lot (copies/diploid genome)||2.9||2.4||3.2, 2.4|
|LVV+ cells||77%||53%||77%, 82%|
|CD34+ cell dose (x106/kg)||7.0||13.6||8.1|
|HbAT87Q (g/dl; at last follow-up)||9.5||1.6||4.6|
|Total hemoglobin||13.3||Not reported||Not reported|
|Days since last transfusion||140||Not reported||Not reported|
|Follow-up||6 months||3 months||2 months|
This early glimpse into the Phase III data is promising (and safe, so far), with the longest data point currently going 140 days since their last transfusion. Considering some patients receive transfusions as often as 3-4 times per month, this is a remarkable feat and bodes well for future data. We expect that additional data will be forthcoming from BLUE over the next few months which will continue to support their clinical trial and put them ahead of their competitors timelines or potential efficacy by a significant margin.
Although we will not cover financials in depth, we do feel that they provide some idea of the stability of the programs being studied by the respective companies. Although the large companies (CELG and VRTX) are profitable, their programs rely on the financial stability of their smaller partners. If there is an additional need for funds during the development of a program, it is possible that the larger partner will need to supply that, assume the studies and development themselves, or write off the product investment as a loss and let their partner go.
XLRN has a recently reported $239 million in cash and a quarterly cash burn of $19 million. Assuming that their Phase III trial will increase costs by about $5 million per quarter (conservative) we see cash on hand being sufficient for 2.5 years. Given the timeline for their Phase III trial being recently completed, but with additional analysis being required before publication, we believe that this cash is sufficient. Furthermore, following Phase III completion the partnership with CELG should provide additional resources and support for rapid commercialization.
CRSP has a recently reported and commented on $253.5 million and a cash burn from activities averaging of $18.4 million over the past 3 quarters. This suggests that they are able to fund their operations for the next 3 years, which is sufficient to support their Phase I/II trials, but we do not feel that this will be sufficient to achieve commercialization. At this point, CRSP is small and exists in an exciting/novel field of CRISPR therapies. As its partners have done, it may look to raise cash via a secondary offering (as we commented on - not likely at the current share price) in the future. Although this does pose an additional risk for VRTX, we believe that CRSP will likely be stable via their potential secondary offering and additional partnerships outside of their blood disorders.
BLUE recently reported cash reserves of $1.1 billion with a quarterly cash burn of $77 million. They are well capitalized to see their Northstar trials through Phase III completion and subsequent commercialization with the cash on hand expected to last greater than 5 years. Their recent successes in other indications using other products also increases the potential that they will see revenues or partnerships which can increase their cash further. They recently announced an equity raise for $600 million in a move reminiscent of what we covered recently on the CRISPR stocks, which will provide a very significant cash infusion following a large run in the stock.
We believe that all three of these companies present risks associated with attempting to treat a complex disease. XLRN has demonstrated a solid safety profile, but has seen some reported AE's from their therapy which may require additional labels for marketing. Furthermore, although they are rapidly progressing with being able to provide a commercialized product, they will not have the same pricing power as their two competitors here, which may provide a curative therapy. CRSP's primary risk is due to its youth in the space and the lead that its competitors have. Although its science is strong and its potential is significant, it will not have any product on the market for the foreseeable future, creating potential cash concerns in the meantime. Additionally, if BLUE is successful, CRSP will be required to demonstrate an improvement over their therapy as part of their marketing and see a higher bar for approval. We believe that these can be met, and are achieved using a potentially less risky tool in CRISPR-Cas9 editing vs. lentivector integration and are less dependent on the number of copies of the vector inserted into a patient (an issue for BLUE). Finally, the largest risks for BLUE are due to it being a frontrunner in the space. Regulatory changes may occur which complicate their filing and commercialization in addition to the risks they continue to face in completing their Phase III trial (this is a blanket statement for Phase III trials, not specific to BLUE, which we are confident in).
In the initial view of this space we look at the largest companies CELG and VRTX in addition to a rapidly approaching competitor in BLUE. The partner for CELG, XLRN, looks to have a product to market first which has shown a positive response in treating ß-thallasemia which will likely capture a significant amount of the market. CRSP is further behind these competitors, but it will be able to bring a strong potential therapy to market in the coming decade which allows for a curative therapy without the addition of exogenous DNA. When they do arrive on the market we believe that their product will provide the most impressive data and strongest investment potential. In the medium term BLUE has the strongest product nearing commercialization (Phase III still underway) which will likely dominate any therapeutic responses to ß-thallasemia as it represents a first go at curative therapies. Their results have been impressive thus far and look to provide hope for those afflicted within a reasonable time frame. We believe that the pullback associated with BLUE's recent equity offering may provide an investment opportunity in this space. We have previously covered CRSP and continue to believe that have the most catalysts in the Cas9 space in the upcoming year, specifically related to their ß-thallasemia and SCD gene therapy.
We will continue looking at the other companies that we previously discussed and their roles in this field as well as the competitive landscape in a future publication, as well as a summary of all of the companies in the space and how we see the competition ultimately playing out in the short, medium and long term.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.