The news out of the J.P. Morgan Healthcare Conference keeps on coming for biotech investors. Intrexon (NASDAQ:PGEN) and its oncology partner Ziopharm (NASDAQ:ZIOP) announced their arrival into the biopharmaceutical field's latest craze: chimeric antigen receptor T cell, or CAR-T, therapies. The duo has entered into an exclusive deal with The University of Texas MD Anderson Cancer Center to license a proprietary approach to the hot new immunotherapy method, which the trio is hoping could result in manufacturing, efficacy, and safety benefits over more widely used approaches. Shares of both companies are up considerably higher today on the news, so let's explore what the deal really means for investors.

What are the highlights of the deal?
Intrexon and Ziopharm will get exclusive rights to a novel CAR-T approach for treating various types of cancers. Both companies handed MD Anderson $7.5 million of common stock to close the deal in time for an announcement at the J.P. Morgan Healthcare Conference. But each will print an additional $50 million in new shares to give to MD Anderson within the next 60 days, which brings the total equity transfer to $115 million.

The deal reflects the reality that both companies are a bit late to the CAR-T party, but there's more. Ziopharm has agreed to fund research activities at MD Anderson to the tune of between $15 million and $20 million per year for the next three years. The development stage biotech had $46 million at the end of September and burns roughly $7 million per quarter, meaning Ziopharm will need to raise additional capital in 2015 and beyond to fulfill its obligations.

It will likely get help from Intrexon, which owned 16% of the company at the end of September, essentially making Ziopharm a partially owned subsidiary. Intrexon will see its ownership stake decline after the dilution from the MD Anderson equity offer, but will also likely be a leading participant of future fundraising rounds of Ziopharm.

The new CAR-T trio expects to launch up to five clinical trials in 2015 and develop manufacturing programs in 2016. And despite the large upfront nature of the deal, the technology platforms wielded by Intrexon and Ziopharm are a perfect fit for the new CAR-T approach -- although that alone doesn't mean it will prove safe or effective.

What's so great about CAR-T?
The immunotherapy approach collects a cancer patient's T cells, a potent type of immune cell, and genetically engineers them to produce special surface proteins called CARs, which recognize specific proteins on the surface of cancer tumor cells. Researchers grow the engineered cells to high concentrations and inject them back into a patient's body. In other words, CARs allow T cells to find cancer more selectively while limiting the damage to a patient's healthy cells, as the patient's own immune cells act as the "drug".

That's how CAR-T works in practice, but the immunotherapy approach is also working for investors. Many biotech companies, both large and small, have joined the CAR-T frenzy in the last 12 months by partnering with academic research labs across the country. Therapeutics are still in the early stages of development, but have shown impressive results.

For instance, Novartis is developing CTL019 with the University of Pennsylvania for treating pediatric acute lymphoblastic leukemia, or ALL. In two pilot clinical studies conducted by the Children's Hospital of Philadelphia, all signs of cancer disappeared in 27 of 30 patients, while 19 of those 27 patients had remained in remission at the time the results were published. Fifteen of those 19 received no further therapy, while four patients withdrew to receive a different therapy. The results were eyebrow-raising, and CTL019 earned the U.S. Food and drug Administration's coveted Breakthrough Therapy designation, though it remains early in the development process. 

What differentiates Intrexon and Ziopharm?
Intrexon and Ziopharm licensed the proprietary Sleeping Beauty CAR-T technology from MD Anderson. The novelty all comes down to how a patient's harvested T cells are engineered to express CARs on their surface. Without getting too far into the weeds, the purpose of genetically engineering a T cell is to alter its DNA by adding new genes that produce the desired surface proteins. Leading CAR-T players such as Novartis and Juno Therapeutics utilize viral vectors to add new genes. However, it can be relatively expensive to create the viral vectors, genes may not be added sufficiently (increasing the number of attempts to genetically engineer T cells), and gene additions can be lost with each new cell generation (a problem when growing T cells to concentrations sufficient for reinjection).

The MD Anderson complex in Texas. Image source: MD Anderson.

Sleeping Beauty uses a non-viral, DNA-based plasmid system which could have several potential advantages over viral vectors for genetically engineering T cells including lower manufacturing costs, more robust gene addition, and more stable gene integration. Better yet, the trio hopes that Intrexon's novel RheoSwitch technology will supercharge the effectiveness of the therapies being developed by allowing better control over CAR expression. That has the potential to further fine-tune selectivity and therefore safety of the treatment.

Any reasons for caution?
As always, yes. Experts aren't exactly sold of the potential benefits of Sleeping Beauty. Data presented by MD Anderson researchers at the American Society of Hematology annual meetings the last two years failed to impress. While the preclinical data appeared to show a cleaner safety profile over other early stage CAR-T therapeutics, the data didnt perform nearly as well in efficacy. Moreover, some experts believe the improved safety profile was actually derived from the fact that the therapy isn't very effective.

The deal is also exceptionally dilutive and risky for Ziopharm. Consider that Intrexon is pursuing multiple collaborations across energy, health care, and food applications with its synthetic biology platform. Projects include everything from genetically engineered salmon to microbes that consume natural gas to produce cosmetics. If this project fails to achieve success it won't really hurt Intrexon. But since the majority of Ziopharm's pipeline is now based on Intrexon's platform, it won't be nearly as unscathed from a failed outcome.

Buy or sell the news?
CAR-T therapies have tremendous promise to change how we treat -- and for some lucky patients, even cure -- cancer. Early results have been impressive, but investors should remind themselves that neither safety nor efficacy has been proven in large clinical trials. The novel approach being pursued by Intrexon, Ziopharm, and MD Anderson may present potential advantages over other traditional therapies, but it's much too early to know if they'll be proven in real-world studies.

Given the lack of maturity of the programs, the subdued enthusiasm from experts in the field, and the dilutive nature of the deal for Ziopharm in both the near- and long-term, I wouldn't buy shares of either company on the news today. You could argue that Intrexon is worth a look for the breadth of its research pipeline, but, in my opinion, this CAR-T program alone isn't worth a double-digit pop for the company. It's safer on the sidelines for now.

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