CRISPR Therapeutics's Leading Thalassemia And Sickle Cell Disease Investigational Therapy

Summary

• CRSP's leading investigational therapy CTX001's mode of action creates a situation where the company is killing two birds with one stone, treating both beta-thalassemia and sickle cell disease patients.
• Although the beta-thalassemia market size is small, the combined patient pool of Sickle Cell Disease and beta-thalassemia is enough for a commercially viable launch once the therapy is approved.
• The latest update on CTX001 was in December last year. Given the trial's three-month endpoint, investors should expect an update for the newly enrolled patients soon.

Photo by jarun011/iStock via Getty Images

Investment Thesis

CRISPR Therapeutics' (NASDAQ:CRSP) leading investigational drug showed promising clinical trials result. All beta-thalassemia patients treated by CTX001 are now transfusion-independent, which is remarkable, given that the average monthly transfusion before treatment was 3 per month.

The drug, called CTX001 in clinical labs, increases the count of healthy fetal hemoglobin, curing both beta-thalassemia and sickle cell disease, both genetic ailments stemming from dysfunctional hemoglobins.

The US market size of beta-thalassemia is small, with the disease more prevalent in developing nations in India, Pakistan, and the Middle East. The European market for Beta-thalassemia can't be ignored, with southern European countries having the most incidents in the continent. Sickle Cell disease is much more common in Europe and the US, allowing for pricing flexibility once the drug is approved.

Biotech Investing 101

The basis of biotech investing is the potential earnings from newly introduced therapies. An astute biotech investor will understand the progress and market size of investigational treatments in the pipeline, calculating the probability of success given preclinical and clinical trials' outcomes. Intellectual property is the second dimension of biotech valuations, but in many regards, it circles back to potential earnings at the end.

The commercial success of launching a new therapy will depend on many factors, including commercialization efforts such as educating physicians on the availability of a new treatment. Another factor is the nature of the diseases and the drug label, which defines patients' scope. For example, bluebird's (BLUE) Zyenteglo, the now-suspended beta-thalassemia therapy, was authorized in Europe for transfusion-depended, non-B0/B0 beta-thalassemia patient above 12 years old, with no matching HLA donor. Each of these conditions decreases the patient pool further. The promising results of the CLIMB THAL-111 clinical study encouraged CRSP to add a patient with B0/B0 genotype, the severe case of beta-thalassemia. This patient has been transfusion-independent since taking CTX001, demonstrating efficacy even in tough cases of beta-thalassemia.

Another factor determining the commercial success of new drugs is the nature of the disease and the absence of alternative therapies. Exondys 51 is an example of treatment with questionable efficacy that achieved commercial success. Its FDA approval was stained with controversy, congressional interference, new presidential laws, and historical overruling of an FDA committee by its heads. Its questionable efficacy led the EMC to block the therapy in Europe. Only the US and Israel authorize the medicine. The Institute for Clinical and Economic Review issued a strong rebuke for Sarepta (SRPT), the company behind the therapy.

Three years after approval, the manufacturer has provided no high-quality evidence of benefit, many patients and families are surely losing out, and only the manufacturer truly benefits from this deplorable situation. Families and patients with DMD deserve better.

Still, Exondys 51 has been a great success commercially, despite targeting a rare disease that is only authorized in the US. Two factors led to this success

1. Lack of alternative therapies.
2. The seriousness of the illness, given its rapid progression leading to early death in children.

The intellectual property value is another factor for biotech valuations and, subsequently, shareholders' returns. Luxturna, the gene therapy treating Leber congenital amaurosis, was a commercial failure for Spark Therapeutics in many respects. Luxturna sales were $27 million in 2018, in the year after its commercialization, which didn't close the $590 million development and commercialization costs. In 2019 Luxturna sales were $39 million on a TTM basis, still far from balancing development costs, not to mention any investors' return. The reason for low sales is the rarity of the Leber Congenital Amaurosis subtype targeted by Luxturna. Still, the intellectual property behind the therapy attracted Roche, which acquired Spark Therapeutics in late 2019, generating 100% return for shareholders at the time of the deal. Roche understood that Spark's intellectual property could be leveraged to manufacture therapies targeting different genetic mutations using the same vector design, administration method, and manufacturing process as Luxturna. This is a case where an effective drug (at least in the short run) didn't achieve commercial success but created considerable intellectual property value.

Applying Lessons Learned on CRSP

The valuation of biotech depends on

• The progress of its clinical trials
• The commercial success of its therapies determined by the prevalence and the nature of the disease
• The intellectual property behind the therapy, namely the ability to leverage this knowledge in manufacturing therapies with similar pharmacokinetics and delivery methods.

From an intellectual property angel, CRSP comes at the top of the gene therapy field. The company is a leader in Cas9 gene-editing with exclusive rights for CRISPR Technology along with a handful of other biotech companies, such as Editas Medicine (EDIT), Intellia Therapeutics (NTLA), and Beam Therapeutics (BEAM). Preclinical trials show that CRISPR technology is safer than Lentiviral Vector gene therapies, the technology behind the now-suspended Zyneteglo, and more effective than Adeno-Associated Vector therapies, the technology used by Luxturna.

The clinical study of CRSP's leading investigational medicine is progressing nicely. In December, CRSP announced promising results from CLIMB THAL-111 study, targeting transfusion-dependent beta-thalassemia patients. Beta-thalassemia is an inherited blood disease that causes the bone marrow to produce dysfunctional hemoglobin; the proteins responsible for carrying oxygen in the blood. It is too early to celebrate, but here is what we know so far. Seven out of seven patients in the study became transfusion-independent for at least two months at the last reading time. This is quite significant progress given that, on average, these patients required three transfusions per month. Since taking CTX001, hemoglobin levels increased to levels that they don't need transfusions.

CRSP is preparing for phase three clinical trial, which will enable the company to submit follow-up data on these patients to test the efficacy and safety of its medicine to the FDA. Thirteen new patients have been dosed in the beta-thalassemia study and seven in the sickle cell study.

The primary endpoint of CLIMB THAL-111 is a reduction of transfusions starting three months after administering CTX001. The latest data came in December, and if the company decides to give investors an update on a three-month interval, investors should expect an update on the trial soon.

The company also announced promising results for its CLIMB SCD-121 trial, which includes three sickle cell disease patients. Since taking CTX001, none of the patients experienced vaso-occlusive pain crises, which is the therapy's endpoint. This is an indicator that healthy counts of hemoglobin are circulating in the blood.

From a market-size perspective, beta-thalassemia is a rare disease and most prevalent in Southeast Asia and the Middle East, and to a lesser extent, Southern Europe. The company estimates that there are 16,000 beta-thalassemia patients in the US and Europe but this figure includes all beta thalassemia subtypes; Minor, Major and Intermedia. Historically, the FDA and EMC assigned new therapies to more extreme cases of a disease. For example, Zyneteglo was approved for patients with beta-thalassemia major, with no HLA donor, and above 12 years old. This significantly reduces the market size of CTX001. You can read a detailed discussion of beta thalassemia market here.

Still, since the treatment works by increasing the count of healthy fetal hemoglobin, it also has the potential to cure sickle cell disease. Sickle Cell disease has a higher incidence than beta-thalassemia. The current patient pool is 150,000 in the US and Europe. This is enough to create a commercially successful launch of the therapy, especially given Sickle Cell's detrimental effects on life quality, embodied in painful vaso-occlusive crises.

Summary

CRSP checks the list of a solid investment on more than one front. Its leading therapy, CTX001, showed promising data from the CLIMB THAL-111 and CLIMB SCD 121 clinical trials, with all patients achieved transfusion independence and absence of vaso-occlusive pain crises. Both Sickle Cell Disease and Beta-thalassemia create a large market for CTX001 and increase potential commercial success once the FDA approves the drug.

Analyst’s 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.