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This Little-Known Company Should Have Gilead's and Celgene's Investors Nervous

Brian Orelli, The Motley Fool

With Gilead Sciences (NASDAQ: GILD) acquiring Kite Pharmaceuticals and Celgene (NASDAQ: CELG) buying Juno Therapeutics to gain access to their chimeric antigen receptor T cell (CAR T) cancer immunotherapies, you'd think the biggest competition would be among the two large biotechs and Novartis (NYSE: NVS), which also has a CAR T therapy on the market.

But there's a new kid on the CAR T block that Gilead's, Celgene's, and Novartis' investors need to keep an eye on: Allogene Therapeutics.

Last week, privately held Allogene Therapeutics came out of stealth mode, announcing a $300 million series A financing. In the biotech world, that's an amazing amount of money for venture capitalists (VCs) to give a start-up in the first round of investments. For context, Juno's series A round was initially announced at $120 million, which was increased to $176 million by the time it closed in 2014. Kite didn't raise anything close to that from early VC investors.

Closeup of a cell

Image source: Getty Images.

Given the experience of Allogene's leadership team, it shouldn't come as much of a surprise that VCs are willing to pony up. Arie Belldegrun, Kite's former chairman, president, and CEO, is Allogene's executive chairman, and David Chang, who was Kite's chief medical officer among other titles, will be Allogene's president and CEO.

The duo won't have to start from scratch; Allogene is inheriting Pfizer's (NYSE: PFE) CAR T program of 16 preclinical CAR T assets and one phase-1 CAR T therapy, in exchange for a 25% stake in the company. The new company should be able to hit the ground running with 50 or so Pfizer employees transferring over in the process.

Off the shelf

Allogene is behind Gilead and Novartis, which already have CAR T products on the market, and even Celgene, which should have its lead CAR T therapy approved in 2019. But all three of the programs are considered autologous therapies in that they use a patient's own immune cells, which are removed, trained to attack the tumor, and then infused back into the patient. It works well, but requires individual manufacturing for each patient, which is expensive and takes time.

Pfizer's CAR T program, which it got through a research collaboration with France-based Cellectis (NASDAQ: CLLS) and Servier, are allogeneic, meaning they're made from healthy donors, so they can be made ahead of time in batches and stored, ready to treat patients when the decision to use a CAR T is made.

All things being equal, allogeneic is preferable over autologous, particularly because cancer patients' immune cells are often not in great shape -- especially if they've been treated with chemotherapy -- making it difficult to manufacture functional T cells. Of course, all things haven't been proved equal yet, and for Allogene to actually take market share, it is going to have to show that its allogeneic CAR T therapies can work as well or better than autologous ones.

Technician setting up patient for an infusion

Image source: Getty Images.

Behind but not out

Allogene and Servier, which has rights to the therapy outside the U.S., plan to start a phase 2 trial next year for the lead candidate, UCART19, which targets CD19-expressing blood cancers.

Not to be outdone, Gilead announced a partnership with Sangamo Therapeutics in February to use Sangamo's gene editing technology to develop allogeneic CAR T therapies. The deal includes the potential for 10 or more products.

Celgene has a stake in its spinoff Celularity, a privately held company focused on using placenta-based stem cells that could eventually be used to make CAR T products. Stem cells might allow easier manufacturing, but the strategy is likely further behind.

Look out for disruptors

There are a lot of potential targets to train T cells to attack, and plenty of different types of tumors to treat with CAR T therapies, allowing ample room for multiple companies to have blockbuster CAR T therapies. But like any technology, with potential comes companies looking to disrupt it with better technology.

Investors in Gilead, Celgene, and Novartis need to keep an eye on the progress that Allogene is making with allogeneic CAR T therapies and make sure their companies are following the trend if the new strategy ends up working better than the current autologous treatments.

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Brian Orelli has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Celgene and Gilead Sciences. The Motley Fool has the following options: short May 2018 $85 calls on Gilead Sciences. The Motley Fool has a disclosure policy.