The exciting renaissance in cell and gene therapy over the past five years has yielded some of the most innovative medical advances in the industry’s pipeline today. There are now multiple stories of patients getting “cured” of rare diseases, responding to treatment at previously unheard of rates, and dramatically improving the quality of their lives. These recent advances in the cell and gene therapy (CGT) field are great examples of why we and many others in the industry get out of bed in the morning.
Beyond the huge potential for impact, the speed with which the CGT field moved from the fringes of the sector into the mainstream has been remarkable – and is worth reflecting on.
Let’s start with the evolution of the current “conventional” modalities in our business – the pill and the vial as the principle product.
These modalities largely evolved with what I would an “inside-out” model of technology development. These small molecule and protein-based drugs were largely developed within the BioPharma industry. While key and foundational discoveries often came from academia, like the early recombinant monoclonal antibody patents, their translation into clinical practice has historically been the realm of industry. The know-how and artisan skill of moving from basic discovery into formal “early development” and clinical medicine mostly emerged from industry-driven efforts.
New chemical entities, long the bread and butter of Big Pharma, were the products of fully integrated R&D and manufacturing teams, and the understanding of what made a good vs bad lead candidate emerged over time. All the expertise was largely owned and developed in-house. Similarly, developing and manufacturing biologics like replacement proteins or recombinant antibodies at scale was largely the domain of the early integrated biotech companies, like Amgen, Genentech, Biogen, and others. The bespoke art of biomedical product fermentation and subsequent bioprocessing was advanced through in-house learning within the biotechnology industry.
Insights from those larger and emerging companies then seeded a burgeoning contract research infrastructure in the 1990s and beyond. Clinical CROs emerged to help industry with the challenges of global scale in clinical development. A plethora of drug discovery CROs formed (like AMRI, Argenta, BioFocus, ChemPartner, Evotec, WuXi, etc) by ex-Pharma industry veterans, leveraging the insights from decades in the medicinal chemistry and biologics ranks of industry. CROs evolved to meet the demands – and soak up the extra talent – coming out of the industry.
In time, lots of these insights from the industrial translational process of making drugs found their way back into academia. The NIH began to fund dedicated drug discovery centers in academia about a decade ago, and impressive high throughput centers like those at the Broad or Scripps Institutes emerged. These efforts were largely populated by ex-industry drug discovery veterans, transporting with them the know-how and institutional knowledge from industry into these academic efforts. The same narrative could describe the advances in fully human antibodies and such – academic discoveries into phage display and transgenic mice were taken up by industry in their formative moments, put through the process of industrial discovery and early development, and then advanced into clinical studies and eventually the market. Again, academia were benefactors of the industrial translation and development insights, and hence why many labs today do far more than just basic research (by working on discovering new drugs).
With that context, it’s fascinating to observe the “inverted” evolution of the CGT field – more of an “outside-in” model of technology development.
Three specific observations can be made:
- Without a doubt, academics have led the charge in the CGT field as pioneers in its clinical translation. Dedicated academic investigators, typically at top tier medical centers, spent the last two decades advancing these modality and their programs into clinical testing. These efforts were largely done without significant Big BioPharma involvement or industry-sourced capital. In the CAR-T field, it was the hard work of academics like Carl June at Penn, Michel Sadelain at MSKCC, Steve Rosenberg at NCI, and many others that proved these new modalities worked in clinical testing before any conventional industrial player got significantly involved. In 2011, just after the publication of the landmark CAR-T publication showing responses in CLL, Novartis moved in aggressively. Only after academics delivered the key data, and Novartis dove in, did significant biotech and venture capital funding flow into the space with the launches of Juno, Kite, and now many others. A similar evolution existed in the gene therapy field: early clinical data from academics in leukodystrophies, ocular diseases, and blood disorders were the catalysts that brought industrial interest and capital to the CGT field. Leaders in the field include Jim Wilson of Penn, Luigi Naldini of TIGIT, and both Guangping Gao and Terry Flotte at UMass, amongst many others. These pioneering academics in these fields, and the courageous patients that participated in the studies, deserve to be recognized as real translational leaders. New gene and modified cell constructs were cycled through preclinical models and patients, and back again, until they demonstrated clinical efficacy.
- The industrialization of the CGT field has been catalyzed in part by Contract Service Providers that emerged in parallel to academic efforts, rather than as a byproduct of prior industry insights. Unlike conventional modalities, which seeded the mainstream CRO industry, the opposite has largely occurred here. In the virus manufacturing space, many of the CGT players don’t have in-house production; instead, they rely on multiple vendors that exist externally. For example, in the AAV, lentivirus, and retrovirus vector field, players like Eufets, Genibet, Lonza, Molmed, Novasep, Sigma Aldrich, Rimedion, Waisman, and many others exist. At least today, in the early innings of the clinical development and commercialization of the CGT field, most biotech therapeutics companies don’t make their own virus; they just provide the critical plasmids with proprietary transgenes. Another example is ex vivo cell processing; while a few players have now moved to acquire and build central processing capabilities (like Novartis), alternative cell processing systems and solutions have emerged across the US and Europe to support the growing ex vivo aspects to the industry (e.g., Apceth, PCT/Caladrius, Lonza cell therapy, Miltenyi, Wuxi AppTec, and lots of other players). Further, academic medical centers have led the way in developing their own infrastructure solutions for virus and cell manufacturing – indeed, many have not-for-profit affiliate “businesses” that run state-of-the-art GMP and cell processing activities on their premises (e.g., Minnesota’s MCT, Orsino Cell Therapy facility in Toronto, Penn’s Clinical Cell Center, and many others). This is a real contrast to the “inside-out” model of how the NCE and biologics fields emerged.
- Lastly, simultaneous waves of convergent technology evolution have self-reinforced the CGT field. Advances in ex vivo cell processing, evolved in part for the transplant and cord blood field, have supported the advancement of gene therapy and gene editing technologies. Gene therapy, in particular with stable integration, has enabled long-lasting cell engineering for rapidly dividing cells like CAR-Ts. Virally-engineered and genome edited cells, like Cellectis’ recent allogeneic CAR-T, are coming together into single products. The technologies for the ex vivo expansion of selective cell populations, such as for HSCs with Novartis’ SR1 and others, or for T-cells with the DynaBeads, have helped accelerate the CGT field as a whole. The synergy between cell transplant therapy, viral gene therapy, and gene/genome editing has created a virtuous cycle for advancing these new modalities. Throw in the local and systemic delivery insights (from fields like RNAi and stereotactic/precision injections), and the field catches on fire even more as waves of complementary innovation reinforce each other.
It’s worth asking why the CGT field has been an outside-in development story, both to understand the differences and also ponder the future. Presumably there are lots of reasons, but one of the big ones in my opinion is that all the early attempts failed – and because they failed industry was gun shy of these disruptive technologies. Cell and gene therapies burst onto the scene in the late 1980s and 1990s, just as genetic diseases were being identified and HSC bone marrow transplants were being widely adopted. For instance, the original CAR-T constructs were described by Zelig Eshhar in a 1989 PNAS paper. Gene therapy was trumpeted as breakthrough with the NCI doing trials in the early 1990s. But a lack of profound success – the modality just wasn’t ready – and the tragic death of Jesse Gelsinger in 1999 relegated the CGT field to the fringes of industrial biomedical research. VC’s weren’t very keen on funding these companies, and Pharma wasn’t comfortable with entire business model of selling cells and viruses as products. There were certainly a few companies doing work in the space (e.g., Genetix, founded in 1990, changed its name to bluebird bio in 2010). More than a decade of “out-of-mainstream” academic research, and slow but methodical exploration by clinicians at a few medical centers, helped advanced the field to where it was 3-5 years ago – which is when the boom really began. The academics in this field kept it alive and advanced it when industrial R&D neglected it.
This outside-in evolution for CGT has had a few big implications on the biopharma ecosystem.
First, VCs and the startup ecosystem have greatly benefited. Launching “brand new startups” on the back of early clinical data has dramatically shortened the time to clinical proof of concept, like bluebird’s (re)launch with INSERM’s data, Juno with MSK’s CD19, Kite with NCI’s version, or Spark with Penn’s eye program. A conventional modality will often take 3-5 years (or more) slogging through drug discovery before it generates clinical data of significance. This has rapidly sped up the path to value inflections, as is self-evident from the significant market cap’s of CGT-based companies today. Further, the early wins in the space have created more enthusiasm in the field, allowing even CGT stories without clinical data to go public at premium valuations (e.g., Voyager and Dimension’s ~$350M IPO valuations are a good recent example). It is fair to say that the academic institutions have benefited too: Juno has paid “success payments” and issued significant equity to MSK and Hutch, Novartis has funded a lot of infrastructure at Penn, and Spark has delivered a staggering sum of equity back to Penn.
Second, the Big BioPharma industry is largely playing catch-up here, with little in-house expertise and a strong institutional cognitive bias against cells-as-product business models. Novartis’ CAR-T investment is at a scale matched by few in the Pharma world. Most other Pharma’s are doing all this work through collaborations rather than in-sourcing and building internal capabilities (e.g., Pfizer with Spark and Cellectis, Amgen with Kite, Celgene with Juno and bluebird, as well as many others partnerships). GSK was once a leader here, but let RegenX Bio and the Wilson AAV IP estate slip out of its fingers when gene therapy wasn’t so hot, and has only really tiptoed back in with the lentiviral partnership with TIGIT/San Raffaele in Milan.
Lastly, with value and supply chains that are vastly different than conventional pill- or vial-as-product business models, the CGT field is likely to evolve in alternative ways. Its almost certain that as CGT products begin to advance into product approvals and commercialization, companies will move to integrate more of their capabilities by bringing certain aspects to cell and gene technology in-house (e.g., cell processing), but its likely to remain a different and disruptive operating model. Further, typically product owners reap the vast majority of the rewards in the value chain, and providers of services see little (just compare the profit margins of Big BioPharma with Big CROs). And most conventional drug pricing and reimbursement models aren’t meant for cures, or even those with an intent to cure. So will the operating model evolution be different going forward in the CGT field? Almost certainly.
As the space figures out what the key value-driving differentiated capabilities are likely to be, the profits may divvy up in different ways across product distribution and marketing capabilities, vector and virus manufacturing, central or onsite cell processing, patient sample handling and GMP access, the overall provision of cell transplant services, etc… As a crazy thought experiment, imagine a world where a big company owned and operated cell transplant centers across the country where they obtained autologous cells from patients, conducted gene modification (editing or gene therapy) and simultaneous expansion onsite, in a closed GMP-compliant system, and delivered them back to patients at their own facility – and were reimbursed via a value-based annuity stream linked to therapeutic performance from a healthcare payor for the “one-and-done” modified cell therapy. Interesting to speculate on all the various models of the future in the CGT space.
As with the outside-in evolution of the CGT field, it seems much about this space is different, including but not limited to “cells as the product” business model, and its not clear what this will look like in 2020 or 2025. Most of us believe the clinical impact of the field will be profound, but the uncertainty as to the end game of industry structure makes for great speculation and the wonderful arbitrage of early stage investing.