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Is Pfizer Putting the Car-T Before the Horse?

Immuno-onocology is grabbing a large share of the headlines in oncology drug development these days and generating significant buzz for Big Pharma companies including Merck and Bristol-Myers Squibb (NYSE: BMY  ) . While Pfizer (NYSE: PFE  ) has not been seen as a leader in IO drug development, the company does have antibodies in development targeting IO targets like 4-1BB, OX-40, and PD-1. Now the company has added more shots on goal to its IO platform, striking a collaboration agreement with French biotech Cellectis to develop chimeric antigen receptor T-cell therapies, an unproven but high-potential emerging therapeutic class.

The deal
Pfizer and Cellectis announced on June 18 that they are forming a collaboration to develop chimeric antigen receptor T-cell (or CAR-T) therapies for cancer. Under this agreement, Pfizer will pay $80 million upfront and up to $185 million in milestones for each candidate that emerges from the collaboration (leading to a potential total of $2.86 billion). Pending Cellectis shareholder approval, Pfizer will also take a 10% stake in the company at EUR 9.25/share, which I believe works out to around $27 million based on the company's reported shares outstanding.

Through this deal, Pfizer will gain exclusive rights to 15 oncology targets; the two companies will cooperate on preclinical work and Pfizer will have subsequent development responsibility. Cellectis will also select 12 targets, with Pfizer funding the R&D costs for four of those and getting the right of first refusal for further development and marketing rights. No specifics were given about the targets in the initial release, though Cellectis is known to have identified multiple hematological and solid tumor targets for preclinical development.

CAR-Ts could be strong horses in the race
CAR-Ts are created by taking T-cells (a type of white blood cell) and adding chimeric antigen receptors that recognize antigens associated with a particular tumor type. The modified T-cells are then introduced into the patient, where they significantly enhance the immune system's ability to recognize and destroy cancer cells.

If this sounds familiar, it is very similar to the underlying principle behind Dendreon's (NASDAQOTH: DNDNQ  ) Provenge cancer vaccine. Provenge has demonstrated a roughly four-month median survival advantage in clinical trials, but has been a commercial disappointment. Some of the disappointment can be attributed to the strong clinical performance of new drugs from Johnson & Johnson and Medivation, but the need to collect dendritic cells from each patient and create a customized product has also been a limiting factor.

In contrast, Cellectis has been focusing on an allogenic approach that would not require the collection/extraction of each patient's own T-cells. Instead, this would be an "off the shelf" product that would be faster, easier, and cheaper to produce.

Multiple players already at work
The CAR-T therapeutic class is hardly mature, but that does not mean that Cellectis and Pfizer won't see competition. Novartis (NYSE: NVS  ) is arguably furthest along with CAR-T therapy development, with a very promising treatment for refractory B cell hematological cancers and strong initial responses in patients with pancreatic or ovarian cancer.

Juno Therapeutics has seen very strong initial results of its CAR-T therapy in non-Hodgkins lymphoma, though the treatment did go through a clinical hold after concerns about cytokine release syndrome. This cytokine release is in some respects a "feature" of how the therapy works, but excessive immune response may be a safety issue to watch in future CAR-T trials.

Beyond Novartis and Juno, Celgene and Bluebird Bio have partnered on CAR-T drug development, and Kite Pharma is also working in the space. Investors may also want to take note of companies developing T-cell receptor (or TCR) therapies, including Adaptimmune – a spin-off from Medigene that has partnered with Glaxo. Both Juno and Kite are also working on TCRs in addition to their CAR-T therapies.

The bottom line
Investors should not get too excited about any preclinical drug development agreement unless they happen to own the shares of the development-stage biotech that has garnered Big Pharma's attention. There have been many exciting new high-potential therapies that attracted multiple big-ticket development deals, only to founder and fail in clinical trials.

That said, CAR-T therapy looks like a high-potential opportunity and Pfizer has moved to tie up what looks like could be one of the stronger emerging technology platforms. It will most likely take 10 years or more for this collaboration to produce real revenue (if it ever does), but the excitement around IO is such that strong phase 2, or even phase1, data could be enough to boost Pfizer's multiple.

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Stephen D.

I'm an ex-Wall Street sell-side and buy-side analyst who has spent most of the last 10 years writing on a wide range of industries and investment ideas.

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