One of the big stories in 2017 was the approval of the first CAR-T cell therapy, developed by Novartis, and the almost simultaneous announcement of the most discussed transaction of the year, the $10.3 billion acquisition of KITE Pharma by Gilead. Even though the results of CAR-T therapies are stunning, intrinsic limitations may lower the high hopes of cancer patients.

CAR-T cells represent a platform for a fundamentally new type of medicine: Kymriah by Novartis, approved in 2017 for certain young and pediatric patients with acute lymphoblastic leukemia (ALL), was heralded as the beginning of a new era in oncology. As the first treatment ever, the FDA designated Kymriah as a “gene therapy” under the 21st Century Cure Act. So, what is the background of this new therapy?

Tauted as the perfect weapons against cancer, CAR-T cell therapies are a result of decades of research into the immune system, and an impressive example of utilizing detailed knowledge of biological processes to create a new treatment. In CAR-T cell therapies, certain immune cells (T-cells) are taken from the patient and genetically modified to act against a “marker,” a molecular which is specific for the class of cells that have become cancerous. After preparation in a lab, the modified cells are reintroduced into the patient. The elaborate modifications make CAR-T cells perfect biological weapons, which trigger the immune system to rapidly attack and wipe out the targeted cancer.

In the case of ALL, the cancerous cells are B-cells, another type of immune cells. B-cells are the only cells in the body which have a protein called CD-19 on their surface. By targeting CD-19, Kymriah eradicates all B-cells—cancerous and healthy. Treated patients lack B-cells, which is manageable as B-cells are not essential for survival.

The success rates of Kymriah are stunning, with more than 80% of the patients, for whom other treatments did not work, entering complete remission, with the potential to be cured permanently.

Triggering one of the few mega-deals in 2017
Around the time of Kymriah’s approval, Gilead made a huge bet on CAR-T therapies by acquiring KITE Pharma for $10.3 billion. Some weeks later, KITE Pharma received FDA’s marketing approval for Yescarta, a CAR-T cell therapy against another form of B-cell cancers.

The transaction value looks high given Yescarta’s estimated peak sales of $2 billion. But Gilead seems like a perfect buyer as the company has a strong track record in making large bets on revolutionary treatments. In 2011, Gilead acquired Pharmasset for $11 billion, purchasing the development program which resulted in Sovaldi, the treatment for Hepatitis Virus C (HCV). Sovaldi and its successor products turned HCV into a curable disease, and generated huge profits for Gilead.

Beyond the hype, limitations loom
Beyond the hype, there are intrinsic limitations to CAR-T cell therapies. Most importantly, the approach can only be used against cancer of cell types which are non-essential and have a specific marker, otherwise the treatment would kill the patient. The only marker which today is known to qualify is BCMA, which is specifically present on blood plasma cells which degenerate to multiple myeloma.

Consequently, the number of patients who could benefit from CAR-T cell therapies seems relatively low. However, there are many possibilities to optimize the molecular design of CAR-T cells. The vision is to train CAR-T cells against solid tumors, which would open a much larger market, and in future variations of CAR-T cells may be used against viral infections.

Adding to Pharma’s business model?
Commercially, CAR-T cell therapies present a supply chain challenge. The patients’ immune cells must be collected, modified, and then re-introduced into the patient within weeks. This requires trained hospital staff, tight coordination, and seamless transportation to and from dedicated manufacturing facilities. This service-based business model is a challenge for Pharma companies which typically sell pills in boxes, and the example of Dendreon’s cancer vaccine shows how the substantial investment required in dedicated manufacturing facilities can make a cell-based therapy commercially unviable.

In addition to CAR-T, there are other cell-based therapies emerging, and a need for manufacturing services which can be used by all players to deploy their cell-based therapies
may arise. Already, some CMOs are trying to position themselves to address this market need. In 2017 Japanese conglomerate Hitachi acquired PCT, a CDMO for cell therapies for $80 million, and Lonza purchased cell therapy CDMO PharmaCell.

Some companies try to establish solutions which avoid the need for manufacturing sites completely. Cellectis of France is developing off-the-shelf CAR-T cells, thus avoiding the requirement to collect the patient’s immune cells before preparing the treatment. Miltenyi, a provider of laboratory instruments, offers automated solutions to create CAR-T cells, which would enable cell modification to be moved into hospitals. And scientists recently published an experimental method to engineer CAR-T cells in-situ, within the body.

Although the latter method is currently tested only in mice, it creates the intriguing possibility that CAR-T based therapies move away from being “manufacturing services” back to being simple injections available for sale, much more closely resembling Pharma’s usual business model. 

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Christoph Bieri is managing partner with Kurmann Partners, a Swiss-based M&A boutique focused on mid-market transactions in the pharmaceutical and medtech industries and adjacent segments. Christoph has led numerous buy-side and sell-side international transactions concerning targets based in the Europe and North America. Prior to joining Kurmann Partners, Christoph was chief executive officer of a venture-financed R&D technology company for biotechnology, and before that a consultant with The Boston Consulting Group.