Adaptimmune Therapeutics (NASDAQ:ADAP) is developing TCR-engineered T cells as a cancer therapy. The pipeline has numerous pre-clinical and clinical stage assets, with one asset likely to be submitted for approval next year. While I believe their short-term valuation is fair, my view is that their diverse pipeline has positioned themselves well for the future.
T cells have long been the target of multiple classes of immunotherapies. These versatile cells are well known for their ability to target and eliminate cancerous cells and as a result, have been the basis for numerous new cancer therapies. One can energize the T cells by blocking their inhibition (checkpoint inhibitors), enhance their activation (cytokine-based therapies), or engineer them to specifically target tumor cells directly (targeted T cells). Adaptimmune is pursuing the latter. T cells work by recognizing what is known as an "antigen" on the target cell's surface. This antigen is displayed to the T cell through a piece of cellular machinery known as MHC Class I (MHC for short). I provided a more in-depth analysis of this pathway in some of my previous articles about other companies targeting this pathway, such as Gritstone (GRTS), Immatics (IMTX), and Immunocore (IMCR) if the interested reader wishes for a deeper dive.
The basis for T cells to recognize antigens lies in a receptor called TCR. Each TCR recognizes a unique antigen. By isolating a TCR that can pick up a distinct antigen, one can in essence engineer naïve T cells to express that antigen-specific TCR. One can clearly recognize that the ability to engineer T cells to target disease-associated antigens (cancer and beyond) could be exceptionally powerful.
Adaptimmune has focused their TCR-engineered T cells solely on cancer. Their product pipeline, SPEAR (Specific Peptide Enhanced Affinity Receptor) T cells are engineered with TCRs that recognize different antigens called CTAs (cancer-testis antigens). There are numerous CTAs and their expression can vary across cancers. It's important to note Adaptimmune does not have a monopoly on targeting CTAs. There are multiple companies in the space, however, I will save the competitor analysis for the end of the article. Regardless of the potential competitors, their clinical pipeline (Fig. 1) contains two CTA-targeted assets: MAGE-A4 and AFP.
Fig 1: Overview of Adaptimmune's clinical pipeline. Adapted from here.
The most advanced asset is afamitresgene autoleucel (afami-cel), a TCR-engineered T cell that targets the MAGE-A4 CTA and is being tested in multiple malignancies. The most advanced indications are synovial sarcoma (SS) and myxoid/round cell liposarcoma (MRCLS). SS and MRCLS are rare cancers that affect less than 2000 patients in the US each year. Unfortunately, the treatment for these cancers has not progressed past the standard chemotherapy and radiation regimes that have been in place since the '80s and '90s (1, 2). As you can imagine, patients who progress or relapse often have a dismal prognosis. There is a clear medical need, and new therapies are few and far between.
The most recent data of afami-cel in SS (and to a certain extent MRCLS) has been absolutely astounding (Fig. 2). The overall response rate in SS was 41.4%, with two patients having complete responses. More importantly, these responses appear to be durable as the complete responders and most of the partial responders have shown a response for multiple months (Fig. 3). The data for MRCLS is harder to interpret as there were only four patients in this trial, with one partial response. I'm exceptionally bullish on afami-cel in SS. Complete responses in heavily pre-treated sarcoma patients are hard to come by. The MRCLS data is exciting, but the lack of patients makes any interpretation a fool's errand so I will be holding my opinion under more MRCLS patient data is released.
Fig. 2: Best response to afami-cel in SS and MRCLS. Adapted from here.
Fig. 3: Individual SS response to afami-cel over time. Adapted from here.
Afami-cel is also being evaluated in head/neck cancer in combination with the checkpoint inhibitor pembrolizumab. Early data from previous phase I trials have indicated a decent response in head/neck. However, I believe that this trial will be eventually superseded in the near future by the next generation of MAGE-A4 TCR T cells from Adaptimmune.
Up to this point, I have simply lumped T cells together as a single entity. However, they are made of two distinct populations: CD4+ and CD8+ T cells. CD8+ T cells are the cancer-killing powerhouses of the immune system, whereas CD4's function in an advisory or "helper" role (though still critical for a proper immune response). Up to this point, Adaptimmune's products have contained a mixture of CD4+ and CD8+ T cells. This next-generation product in essence incorporates a 2nd engineering step to turn CD4+ T cells into CD8+ T cells while still retaining their "helper" function, potentially enhancing their cytotoxicity toward cancer cells. This new product (ADP-A2M4CD8) is being evaluated in a Phase I trial called SURPASS that includes multiple cancer types. These sorts of trials are known as "basket" trials and are often used to determine lead indication(s) in future trials.
Preliminary data was recently released at the ESMO conference this year with particularly good results in multiple cancers (Fig. 4). Strong responses were seen in ovarian (3/7 ORR, with 1 complete response and 3 stable disease) and head/neck (2/2 ORR, both partial responses). Esophagogastric/esophageal was a bit of a mixed bag (1/7 ORR, 1 partial response and 4 stable diseases). These responses appear to be durable as well, particularly those patients who experience partial responses (Fig. 5). The patients with stable disease don't appear to have as durable of responses as one can see their tumor sizes generally slowly increasing with time.
Unfortunately, there was a treatment-related death in the trial as one patient died from pancytopenia. However, I don't believe that this is related to ADP-A2M4CD8 directly. In order to receive the therapy, patients undergo a treatment that transiently depletes their endogenous immune system so that their bodies can accept the engineered T cells. From what I can tell, the patient's death was related to this pre-treatment regime, not ADP-A2M4CD8.
Adaptimmune is pushing ahead with ADP-A2M4CD8 in esophagogastric/esophageal cancer in a Phase II trial. Outside of 1 partial response, the results in esophagogastric/esophageal cancer were not as striking as those observed in ovarian and head/neck cancer. Given the past results with TCR engineered T cells for esophagogastric/esophageal cancer, I doubt the response rates will be great and might show limited activity at best. Frankly, I would be shocked if Adaptimmune doesn't start trials in head/neck and ovarian for ADP-A2M4CD8. My gut feeling is that they are using data from afami-cel to better inform their future trial with ADP-A2M4CD8.
Fig. 4: Best response to ADP-A2M4CD8 in SURPASS trial. MEL=Melanoma, EGJ=esophagogastric junction cancer, NSCLC=non-small cell lung cancer, MRCLS=myxoid/round cell liposarcoma, OVR=ovarian cancer, ESPH=esophageal cancer, UCC=urothelial carcinoma or bladder cancer, SS=synovial sarcoma, HN= head and neck cancer. Adapted from here.
Fig. 5: Individual responses from SURPASS trials. Adapted from here.
The other clinical asset is ADP-A2AFP that targets a CTA found in liver cancer. Unfortunately, public data about this trial is few and far between. I haven't been able to find any actual data, other than a few summaries. Even Adaptimmune's own investor deck barely makes a mention of the trial. The Phase I trial has a total of 13 patients, with 1 patient having a complete response with 6 others having stable disease. A complete response is great news, but no other partial responses makes me wary. I'm holding out on an opinion until I can see the actual data.
Adaptimmune has a very diverse pre-clinical pipeline, with 12 different products in development (Fig. 6). Their pre-clinical pipeline can be broken down into several key areas. The first is expanding the functionality and cytotoxicity of their T cell program. The first of these, ADP-A2M4CD8 has shown good promise in the clinic. Additional "2nd generation" engineered T cells are being engineered to express cytokines that can enhance T cell function within the tumor. The second area is expanding the market of their MAGE-A4 product. As I mentioned in the introduction, T cells function by recognizing antigens on MHC Class I. However, the exact type of MHC Class I can vary between patients, and you need to match the engineered TCR to the type of MHC molecule. One of the most common is called HLA-A02 and is the basis for afami-cel. Adaptimmune is actively looking to expand its MAGE-A4 program to cover more patient MHC types, such as HLA-A1 and HLA-A24 (Fig. 7). A third major push is to create T cells that can recognize tumor targets independent of MHC Class I. These HLA-independent Targets (HiTs) would alleviate the need match the TCR to the patient's MHC type and therefore be able to include much more eligible patients.
The fourth focus is the one I consider the most important: allogenic TCR-engineered T cells. Currently, the only approved T cell-based therapies use T cells gathered from the patient. This results in a bespoke treatment that dramatically raises the costs (CAR-T cells can cost more than a $1 million). A major push in the industry has been to create engineered T cells that are universal or "off-the-shelf". One would no longer need to harvest T cells directly from the patient and instead could use a master bank. This would dramatically lower costs and decrease manufacturing time, creating a win-win scenario for the patient and company. I expect the targeted T cell market to move to a heavy allogeneic focus in the next 5 years and it's good to see Adaptimmune doing the same.
Fig. 6: Adaptimmune's pre-clinical pipeline. Adapted from here.
Fig. 7: Number of eligible patients by type of MHC Class I. Adapted from here.
Adaptimmune has approximately $50 million in cash according to their last SEC filing. In addition, Adaptimmune also has about $235 million in marketable securities. However, their cash balance was recently increased due to a deal with Roche which infused $150 million. This partnership will include additional payments totaling $150 million, additional milestone payments, royalties on any sold product, and a profit/loss option. Their current cash balance implies an enterprise valuation of $700 million, or $465 million if you include their marketable securities.
Its lead asset, afami-cel, will be submitted for FDA approval sometime next year and will likely seek a 2nd-line label for SS and MRCLS. While a drug approval is great news for any company, it's important to note that the eligible patient population for these two indications is quite small (Fig. 8). Less than 800 patients each year would even meet the basic requirements to be eligible, and even less would receive the treatment (not all patients would need a 2nd line treatment or wouldn't qualify for other reasons). Frankly, I'd be shocked if more than 200 patients each year would be treated within the first couple years of launch. Expected cost would be between $100k-$200k, leading to an estimated yearly revenue of $20-$40 million.
Clearly, SS and MRCLS wouldn't come close to justifying Adaptimmune's market cap. However, biotech valuation also needs to include future assets and their likelihood of approval. The clinical data released to date has been exciting and I foresee a future for adami-cel and its derivative ADP-A2M4CD8 in ovarian and head/neck cancer. While submission for approval in these indications is probably 2-3 years away, the early data appears to be bullish. Furthermore, the number of eligible patients is nearly 10x more than SS and MRCLS.
The other pre-clinical assets, while exciting, are simply too far off at this point to provide a meaningful timeline/valuation, especially with limited data released so far. Regardless, it's still a positive to have so many targets as anyone familiar with drug development knows the high failure rate.
Fig. 8: Eligible patient population. Adapted from here.
It is also important to note that Adaptimmune is not the only player in the targeted immune cell market (Fig. 9). The entire field is diverse with multiple candidates, methods, and stages of development. While I believe that there is room for multiple winners in a single indication (not all patients will be eligible for a single type of therapy), the long-term winners will be those that shift to an allogenic/"off-the-shelf" product like the ones Adaptimmune is developing.
Fig. 9: Overview of targeted immune cell players. Adapted from here.
So how does the current valuation of Adaptimmune look? Personally, I think their current valuation is on the upper end of fair. $700 million for a basket of assets, some relatively close to approval is appropriate given the data so far. Adaptimmune has positioned themselves as a leader in the TCR T cell field and will likely be the first one to market. In the short term, I am more neutral on the continued appreciation of Adaptimmune's stock price given its current valuation, lack of immediate catalysts, and volatile macro-economic factors. However, I eventually settled on a "bullish" final rating as their diverse pipeline points toward a competitive business as the field innovates and moves away from the traditional T cell therapies toward allogenic/HiT-based therapies.
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Disclosure: I/we have a beneficial long position in the shares of IMTX either through stock ownership, options, or other derivatives. 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.