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Cancer Immunotherapy Companies: Looking Forward and Looking Back

Opinion

Xconomy Seattle — 

[Updated, 4/7/15, see below] I’ve been researching one of our local immunotherapy developers here in Seattle, trying to round up the views of industry experts regarding the future prospects of a drug at the front of its pipeline. Do they think it’s a good investment? Here’s what I found out:

Analysts predict that sales of its first drug will peak at $2 to $3 billion per year.

The company’s “strong data will give [it] the upper hand in any negotiations with potential pharmaceutical partners interested in the drug.”

Its share price jumped 27 percent on the day of its IPO.

Its drug has “proved to be highly effective in late-stage clinical trials.”

A competing immunotherapy drug (that analysts were worried would take significant market share) was abandoned by the companies trying to develop it.

Sounds pretty darn promising! Where do I send my money?

There’s only one problem. The company I’m referring to is not high-flying Juno Therapeutics (NASDAQ: JUNO). It was Dendreon, which declared bankruptcy in November in the face of a crushing $660 million debt load and weak sales of its prostate cancer drug, sipuleucel-T (Provenge), the subject of the quotes above. The stock, which reached a high of $57.67 in 2010, traded down to 13 cents after Dendreon entered Chapter 11.

This was only a little over four years after the company received FDA approval for its first and only drug. Dendreon’s assets were sold off for $495 million a few weeks ago to Valeant Pharmaceuticals (NYSE: VRX). Although some forty organizations looked through Dendreon’s books, the dearth of bids suggests that most pharma companies thought it would be too difficult to bring sipuleucel-T to profitability. Dendreon’s workforce has shrunk to a small fraction of what it was only a few years ago. Shareholders are likely to be completely wiped out in the bankruptcy.

The problems that Dendreon ran into have been widely recounted, but here’s a short summary:

Sipuleucel-T was considered by many to be only marginally effective, especially for the $93,000 the company was charging for it. Men treated with the drug lived only about four months longer than men in the control arm of Dendreon’s key clinical trial.

The novel nature of this treatment (made by isolating each patient’s white blood cells, incubating them in a lab with immune system stimulatory proteins, and then reinfusing them back into the patient) meant that significant money would need to be spent educating doctors on its use. It also meant that manufacturing costs for the drug would be extraordinarily high. It’s still not clear how much the company was able to do to reduce this expense since sipuleucel-T first came on the market in April 2010.

Two competing drugs (enzalutamide, sold as Xtandi; and abiraterone acetate, sold as Zytiga) came on the market two years after sipuleucel-T was approved. They were each about as effective as Dendreon’s drug and were cheaper and easier to administer (once-a-day pills instead of doctor office infusions).

Sipuleucel-T had a high “cost density” that required doctors prescribing it to lay out $93,000 to purchase this treatment for each patient, then (hopefully) get reimbursed by insurers.

Overall, the expense, marketing and reimbursement issues, limited benefit, and complicated manufacturing process greatly inhibited sipuleucel-T’s acceptance by doctors.

Dendreon proved to be a stock speculator’s dream, with market machinations and accusations that insiders profited from stock sales when they had known that sipuleucel-T sales would not meet the expectations that they had publicly laid out. Some business school is bound to do a full business case study on Dendreon, if it hasn’t been done already.

What about Juno?

I’m hopeful that Juno will succeed in a field where Dendreon ultimately failed for three reasons:

1) Patients will benefit greatly if its treatment is truly effective against cancer, and its T-cell based technology is very powerful. This is not a retooling of some older cancer therapy, but is a new approach that has significant clinical promise based on early data.

2) The company may grow substantially here in Seattle, helping to rebuild a biotech cluster that has been diminished by numerous acquisitions (Immunex, Corixa, Icos, and ZymoGenetics), departures (Amgen, the Bristol-Myers Pharmaceutical Research Institute), and failures (Dendreon, VLST, Allozyne, and Novo Nordisk’s inflammation group) of local companies. A good sign: Juno recently leased a manufacturing site in Bothell, WA.

3) A number of people that I’ve worked with over the years and respect are employed there, and I’d love to see them achieve great success.

What scientific, legal, and business challenges does Juno (and, for that matter, many of the other immunotherapy companies that it is competing against) face?

[Updated with Juno/Novartis deal] 1) Intellectual property concerns. Juno is already embroiled in legal proceedings with the Novartis-backed group at the University of Pennsylvania. Juno licensed some of its IP from St. Jude’s Children’s Research Hospital, which is suing the UPenn group for breaching an agreement over the use of its T-cell technology. I have no idea which group has a stronger position or how this will play out, although it’s safe to say that the lawyers on both sides will be handsomely recompensed. My best guess is that there will be a cross licensing of IP between these organizations. Getting shut out of the market would be fatal. [Editor’s note: Juno and Novartis indeed reached a settlement on April 6.]

Seattle biotech veterans have already seen this scenario play out. Years ago we had a local company, CellPro, whose only product, the Ceprate column (used to purify stem cells from blood), won FDA approval in 1996. Unfortunately, a larger and stronger company with deep pockets and a strong patent challenged legal claims to the technology that were at the heart of CellPro’s product. Despite confident pronouncements in its position, CellPro lost its legal battle in 1997 and was effectively put out of business. The judge in the legal trial accused CellPro’s outside counsel of rendering “deficient” patent opinions and deemed its efforts “a weak pass at quality work.”

2) The technology might not work. Data produced to date look remarkably promising, but the number of patients treated is limited, as are the disease types. Specifically targeting cancer cells remains a tricky business, no matter the approach, because identifying unique molecules on those cells is challenging. Side effects have been significant in a number of cases using T cell-based therapies (a result of the large-scale death of tumor cells), but ways are being found to mitigate them.

3) Manufacturing costs may be so high so that it could be difficult to sell the drug for a profit. Dendreon was forced into bankruptcy by a huge upcoming debt payment, but putting that aside, it appears that it was unable to sell sipuleucel-T at a profit, even with a $93,000 price tag. A new generation of effective, personalized immunotherapy treatments will likely cost much more than that.

4) Pricing pressure and reimbursement by payers. The next wave of personalized immunotherapy treatments is going to be very expensive. This is going to put increased pressure on payers, who will be watching how the specialty drug market (i.e. drugs for rare diseases or small subsets of serious diseases like cancer) is taking up an increasingly large percentage of healthcare dollars. How will the drug get paid for? Ultimately, what gets paid will be tied to just how efficacious the treatments turn out to be.

5) New technology or medicines may render their approach obsolete. Any oral treatment, for example, that produced similar clinical results would present a serious challenge to Juno and its competitors’ business plans. Similarly, having an “off-the-shelf” immunotherapy treatment that didn’t have to be custom-made for each patient would be a huge step forward over individualized treatments. The field is still in its early days, and we don’t know how these things will sort themselves out.

6) Potentially limited patient populations. Rare disease companies (e.g. Genzyme, Alexion Pharmaceuticals, Shire) have shown that you don’t need to have large patient populations to run a profitable and successful business. Having said that, all of their patients get the exact same treatments, which is not the case for these immunotherapy approaches. The American Cancer Society estimates that there were 1,665,540 cases of cancer diagnosed in the U.S. in 2014.

However, many of the immunotherapy companies are targeting (at least initially) the same small cancer subsets. Juno, Kite Pharma (NASDAQ: KITE), UPenn/Novartis, Bellicum Pharmaceuticals (NASDAQ: BLCM), and Cellectis are all targeting patients with acute lymphocytic leukemia (about 6,000 new cases in the U.S. diagnosed each year) and chronic lymphocytic leukemia (14,000 new cases per year). Efficacy of their treatments has been demonstrated mostly in patients with liquid tumors. This could leave a relatively small market to be carved up by a number of companies with somewhat similar technologies if this treatment approach does not expand to new areas. Most of the immunotherapy groups are also looking ahead to clinical trials in solid tumors, including glioblastoma, sarcoma, breast, ovarian, non-small cell lung, prostate, and colorectal cancers. Successfully treating these other cancer types would provide a much larger opportunity for all of these organizations.

7) Keeping egos and hubris in check. Raising lots of venture capital does not guarantee success. Another Seattle cancer immunotherapy company, Xcyte, raised $150 million during the go-go 90s to advance its T cell-based cancer therapy. Xcyte, too, was led by a number of highly regarded industry veterans. Unfortunately, it wound up shutting down operations after nine years in 2005 and selling off its core technology for only $5 million.

We can look back at Dendreon’s (and Xcyte’s) mistakes and think that by recognizing them, the same errors won’t be made again. That’s probably true, but new challenges will arise that will test the leadership of immunotherapy dilettantes and veterans. This includes those folks who were previously employed at Dendreon, Xcyte, and other (now defunct) companies when things were going wrong. It’s worth noting that Juno, specifically, has two former Dendreon executives in senior roles (Hans Bishop, its CEO, was formerly Dendreon’s COO and Mark Frohlich, Juno’s executive VP of R&D, held this same title at Dendreon and was also its chief medical officer). How the executives at each company handle these problems when they crop up will separate the winners (who will need to be both smart and humble) from the losers. As Admiral Hyram Rickover once put it, “It is necessary for us to learn from others’ mistakes. You will not live long enough to make them all yourself.”

Ultimately, the effectiveness of the drug (its “value,” in current industry parlance), the cost to make it, and the price that can be charged will be key factors in the success or failure of all of these immunotherapy companies. As Dendreon fades into history and is laid to rest in the Seattle biotech graveyard, we should see that it gets a proper burial. Let’s give it a three-infusion salute as it is laid to rest. Dendreon’s lasting legacy will be as a true pioneer in cancer immunotherapy. The path it took was not an easy one, having to step over the bleached bones of innumerable failed studies accumulated over a century of treatments designed to boost the power of the immune system.

Dendreon’s initial success in winning FDA approval for sipuleucel-T undoubtedly paved the way for a large increase in venture investing in numerous immunotherapy companies. Despite Dendreon’s missteps and untimely demise, those who follow in its footsteps will hopefully learn from its mistakes, and emerge triumphantly from the large shadow it cast.

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  • Dennis L. Thireault, MS

    The future of Seattle Biotech needs to be focused on Enzyme Manufacturing. We have the talent, the resources, and the world class scientists to be able to do this (In addition the regulatory hurdles are less).

  • ddRNAi works

    $5b market cap for a phase I/II gene therapy trial, with patent woes and BigPharma competition is just crazy. Much better plays out there.