Mustang Bio (NASDAQ:MBIO) surged higher the prior week, after it highlighted substantially positive data in a phase 1/2 study using its gene therapy to treat patients with X-linked severe combined immunodeficiency (XSCID). It was shown that treatment with MB-107 was able to restore the immune system for these patients with the disease. This bodes well for the biotech's gene therapy program, as long as data can continue to be reproduced in a larger group of patients. Mustang Bio's gene therapy program is only a small part of its pipeline, because the other larger portion involves multiple studies using CAR-T treatments for cancer. Competing products in the XSCID space may pose as a major risk for the MB-107 product candidate.
XSCID is also known as "bubble boy" disease. That's because these patients have a severely impaired immune system and are forced to live in highly sterile environments. An impaired immune system can't do well against viruses, bacteria and other diseases. For a person with a functioning immune system getting a virus or bacteria is not life-threatening because the body can fight it off most of the time. However, for patients with XSCID getting an infection can be life-threatening. The current standard of care (SOC) for this rare disease is allogeneic bone marrow transplant. Allogeneic meaning that there has to be a matching donor, otherwise it can't be done. The problem with doing such a transplant is that it carries a lot of risks on its own. Some risks can even be fatal. Here are some risks of undergoing an Allogeneic bone marrow transplant:
As you can see above, a bone marrow transplant may not be a highly recommended treatment option for patients with XSCID. Gene therapies are becoming more prevalent in being able to treat rare diseases in a safe and effective manner. Those who had the disease, recruited into the phase 1/2 study, were under the age of 2 years. There is another study that will involve patients who are over the age of 2. A total of 10 patients were recruited into the study. Data highlighted in the New England Journal Of Medicine dealt with the first 8 patients evaluable. It was noted that those given MB-107 were able to come off of isolation and return home safely. That's impressive for this patient population. The name "bubble boy" disease was coined because these patients have to be isolated from others because of their weakened immune system. Most of the treated patients left the hospital one month after having received MB-107.
A big risk for MB-107 in XSCID is that the population is very small. It is estimated that this disease affects 1 in 50,000-100,000 births. That means the market opportunity may be limited. However, these types of gene therapies that treat rare diseases tend to cost a lot. Some big pharmaceutical companies are looking at high price tags for their gene therapy products. For example, Novartis (NVS) has a gene therapy known as Zolgensma which is being developed to treat Spinal muscular atrophy (SMA) Type 1. It was reported by Reuters that Novartis is looking at charging $4 million to $5 million for a treatment. There is no doubt that's a lot of money for one treatment; however, the biggest challenge is to educate insurers that the money is well spent. For instance, with current treatments, patients have to take a drug for the rest of their lives. One example could be diabetes drugs, because a patient can never stop taking them. In the instance with Novartis' Zolgensma, once a patient is treated they are cured. So in essence it's a trade-off. Instead of receiving the cash over the patient's entire lifetime, the money is coming in upfront with a "one-off" treatment. GlaxoSmithKline (GSK) had a gene therapy known as Strimvelis, which was approved to treat something similar to XSCID known as Adenosine deaminase deficiency (ADA-SCID). GlaxoSmithKline's problem was that it was offered at only a center in Europe and it just didn't gain traction. It was forced to sell its rare disease gene therapy assets, including Strimvelis to Orchard Therapeutics (ORTX). That's the risk I'm trying to point out here with Mustang Bio and its gene therapy. With the population being so small, it might be an issue. In addition, there is the challenge of being able to get insurers to pay millions of dollars per treatment. There is no guarantee that insurance companies will be willing to do so.
According to the 10-K SEC filing, Mustang Bio had cash, cash equivalents, short-term investments and restricted cash of $34.6 million. Considering that this cash wouldn't be enough to fund its operations for the foreseeable future, it chose to raise additional cash. The biotech did so through a $20 million venture debt financing with Horizon Technology Finance. The good news is that Mustang took the $15 million portion upfront upon closing of the deal. The other remaining $5 million is contingent upon achieving certain preset milestones. This cash will be good to fund the company for quite some time, so that it can advance its cell and gene therapy products.
Mustang Bio achieving positive results from its phase 1/2 study using MB-107 for XSCID is good news for patients and for investors. The problem is that there are several risks involved with this clinical program. The first risk is the competitor out there. For instance, Orchard Therapeutics has Strimvelis, which has been approved for Europe to treat patients with adenosine deaminase severe combined immunodeficiency. The biggest risk of all is the pricing of the gene therapies once they are approved for distribution. If Mustang gets MB-107 approved for XSCID, it will have to be priced for perfection. Even then, a high price tag of $1 million or more could pose a significant challenge in getting insurers on board. There is no guarantee that the product will sell well. The good news is that Mustang's pipeline is split into cell and gene therapies. That means as long as it advances its other products in the pipeline it should be okay.
This article is published by Terry Chrisomalis, who runs the Biotech Analysis Central pharmaceutical service on Seeking Alpha Marketplace. If you like what you read here and would like to subscribe to, I'm currently offering a two-week free trial period for subscribers to take advantage of. My service offers deep dive analysis of many pharmaceutical companies. The Biotech Analysis Central SA marketplace is $49 per month, but those who sign up for the yearly plan will be able to take advantage of a 33.50% discount price of $399 per year.
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