On Nov. 28, the Food and Drug Administration (FDA) announced that it was opening an investigation into the possibility of previously unknown serious safety risks associated with the hottest and most technological group of cancer medicines produced to date. Now, drugmakers including Novartis (NVS -1.64%), Gilead Sciences (GILD 0.23%), and Bristol Myers Squibb (BMY 0.34%) are on the hot seat, with their patients' well-being and billions of dollars in revenue on the line.
But what exactly are regulators probing, and how much will it matter for these companies in the long term?
Oncology's knight in shining armor might get tarnished
The FDA is concerned about chimeric antigen receptor T-cell (CAR T-cell) therapies. Recent reports suggest that certain cancer patients treated with CAR T-cell therapies ultimately developed lymphoma, or other closely related T-cell malignancies, as a result of treatment.
CAR T-cell medicines are made by genetically engineering certain cells of the immune system so they attack tumor cells rather than performing their normal role in the body. There are a handful of CAR T-cell products on the market, all of which are indicated to treat various lymphomas, leukemia, or multiple myeloma, and all of which were approved for sale within the last seven years. That means they're very new as a class of medicines.
It's possible that, in some cases, they may be causing a return of the very conditions they're treating in the first place. If confirmed, that would be a very big problem for a handful of gene-editing stocks.
Per the FDA, there's already sufficient evidence to implicate all of the products currently on the market as potential drivers of new lymphomas in patients. A total of 12 cases are under investigation out of the tens of thousands of people treated with CAR T-cell therapies, so the additional risk might seem small at first glance. But as part of their regulatory approval contingencies, manufacturers are obligated to monitor patients receiving the therapies for 15 years after treatment. So there's an abundance of time for the population of affected patients to grow, assuming there is an actual problem and not a statistical anomaly at play.
Unfortunately, there's reason to believe that the reports the FDA is getting are not just a blip.
Manufacturing CAR T-cell therapies involves editing the genes that define the core feature of all T-cells, the T-cell receptor (TCR). While there are safeguards to ensure that the editing process doesn't introduce unwanted mutations that could lead to the uncontrolled cellular growth known as cancer, those protections are known to be imperfect. Even before the latest revelations, the therapies were understood to have a theoretical risk of developing additional malignancies, though the hard evidence for that actually occurring was ambiguous at best.
While the FDA currently maintains that the drugs are still worth using, any changes in the risk-to-benefit calculation resulting from the investigation will impact the conditions under which CAR T-cell therapies are prescribed by oncologists, which will in turn affect how many doses pharma companies will be able to sell.
Competitors won't be affected equally
But how much of a financial risk is really on the table? It depends on how much money each company makes from selling CAR T-cell medicines, and how much they're spending on developing more.
Kymriah, Novartis' CAR T-cell for large B-cell lymphoma, follicular lymphoma, and acute lymphoblastic leukemia, is the most concerning for the moment in the FDA review. Seven lymphoma cases have been reported among more than 10,000 patients treated. Novartis also has a pair of CAR T-cell therapies in early- to mid-stage clinical trials. But in terms of financial exposure, it probably isn't under much pressure: Kymriah isn't among its top 20 medicines by revenue as of the third quarter, nor is it on the company's list of key growth-driver medicines.
Gilead has two CAR T-cell therapies on the market, Yescarta and Tecartus. In the third quarter, those medicines brought in $391 million and $96 million, respectively, with year-over-year growth at 23% and 18%, respectively. The pair's contribution might not seem like much in comparison to Gilead's top line of more than $7 billion for the period, but as both are indeed driving growth, the risk for shareholders is now higher. The company is also developing another CAR T-cell therapy candidate, in phase 2 trials right now.
Bristol Myers Squibb is likely the most at risk, though it only has one CAR T-cell program currently in development. Its sales for the third quarter were $11 billion in total. While its drug Abecma was worth only $93 million in Q3, and its market share is declining, the company's other CAR T-cell therapy, Breyanzi, brought in $92 million and is posting tremendously rapid growth as it was launched in 2021. Slowing down that growth might be a moderate headwind for the stock.
What's next?
Don't rush to sell your shares in these companies based on this news. But be aware that it's likely to be harder for these businesses to continue growing at the same pace if the FDA's investigation returns unfavorable results. And if you're invested in any biotech stocks pursuing CAR T-cell therapy as their primary pipeline strategy, beware. In comparison to the juggernauts, smaller competitors may have a harder time complying with any monitoring or manufacturing requirements imposed by regulators.
