"Stupid Money" Arrives In Cell Therapy: Can It Be Sustained?

By Trisha Gladd, Editor, Life Science Connect

The practice of stem cell therapy dates back over 30 years when doctors first used bone marrow to treat cancer patients. Since then, the field progressed but slowly. That is, until the last few years. In 2011, the cell therapy market hit its first billion dollar year, and a recent report indicates the total value of the cell therapy industry is estimated to reach $117 billion by 2018. And while the future is very exciting, it is also very unpredictable.

“There seems to be no immediate limit to the amount of capital influx that is occurring,” says Anthony Davies, president of Dark Horse Consulting. “This is reflected in merger and acquisition activity, as well as further significant investments.” In a presentation he plans to deliver at this year’s BioProcess International Conference & Exhibition in Boston, Dr. Davies humorously refers to this influx as the arrival of “stupid” money.

Clinical Trial Success Translates Into Big Money

Anthony Davies, president of Dark Horse Consulting, has worked in the cell and gene therapy field for over 20 years. He credits the explosion of interest to the unexpected and astonishing results in clinical trials for CAR T-cell therapy. “These were basically patients that have no recourse,” explains Dr. Davies. “Now we’re seeing complete responses in excess of 80 percent. That’s obviously a stunning result, and it was replicated in multiple trials. That was the catalytic event that changed everything.”

So far, this success has been restricted to liquid tumors only, which are small patient populations and somewhat rare diseases. Many are still waiting for the field to deliver these same results on a solid tumor or other larger indication. Nevertheless, the degree of efficacy seen so far has dramatically changed both the outlook and the interest in this field. For example, in June of this year, Celgene Corporation announced a $1 billion investment in Juno Therapeutics “to develop and commercialize novel immunotherapies for the treatment of cancer and autoimmune diseases.” Dr. Davies says an investment like this is many fold larger than the market’s previous largest deals.

Just two years ago, Janssen Biotech and Capricor Therapeutics executed a collaboration agreement worth up to $325 million, which was considered large at the time. “This same deal would not even make today’s top ten,” he notes. So what’s the difference between then and now? According to Davies, the answer is the dawning of stupid money in the cell therapy market. “There’s nerd money and there’s stupid money,” he explains. “We’ve been dominated by nerd money for decades. When bad news comes out, such as negative results in a clinical trial, nerd money goes home and invests in the next bright, shiny thing, because that’s what it does.” He references the hits that such companies take whenever their drug trials miss primary end points. “If you look carefully at the data, it often isn’t actually bad news,” continues Dr. Davies. “But market caps will drop somewhere between 40 and 60 percent in the subsequent 24 hours and not recover, because it’s nerd money. With stupid money, when an event like that occurs, nothing really happens.”

While this makes the field sound unstable, this is actually a great sign of maturation for the cell therapy market. Stupid money doesn’t just exist in pharma; it exists in any area where an investor sees so much stability that even major setbacks do not cause stock market chaos. “There’s stupid money in companies like Exxon and Bank of America,” he says. “If someone puts their money in those stocks, it’s usually not because they have a firm understanding of the oil industry or the banking industry. It’s because they think they’re safe havens. You certainly don’t shut your 401(k) down because Exxon has a bad day. That is how this field is now maturing, and it will develop fiscal inertia, which is a good thing.”

Companies in the cell therapy industry have been able to translate these market caps from the stock market into good cash positions, which will also allow them to ride out any future adverse events. Additionally, he explains, as investors buy in, these companies’ stock prices will go up and those who didn’t invest in the right time will then looking for other places in the field where they can put their money. As the saying goes, “a rising tide lifts all ships.”

How Can Industry Achieve Sustainability?

Now that the cell therapy market has reached this level of interest and value, it’s up to the industry to sustain it. So how can this be done? According to Dr. Davies, some refocusing will need to occur, and in some ways, it already has. 

First, cell therapy companies shouldn’t just focus on unmet medical needs; they should focus on significant unmet medical needs. “There has been a tendency in the industry to focus on orphan diseases and diseases that don’t affect many people,” he explains. “Although that is obviously a good thing for those afflicted with the disease, it is not the best way to build a sustainable industry.” He cites Provenge, one of the first approved cell therapies, as an interesting example.

At one time, this treatment for advanced prostate cancer was expected to become an industry blockbuster. However, after sales fell significantly short of expectations, Dendreon, the company that brought it to market, had to file for bankruptcy. There were several factors that contributed to its market failure, but Dr. Davies believes one of them was because it went head-to-head with XTANDI, a small molecule drug also for the treatment of prostate cancer. “It’s incredibly hard for a cell therapy to go head to head with a small molecule,” explains Dr. Davies. “It’s even harder for a cell therapy to go head to head with a monoclonal antibody, because they are much more manufactural, much cheaper, and much more accepted in the field.” Until cell therapy can build the same trust within the industry that small molecule drugs and mAbs have, going after the unmet needs that no one else is provides the safety net a company in this market needs right now.

Another area where he says the cell therapy industry needs to focus is cost. In the U.S. and globally, patients will face price tags anywhere between $20,000 and $100,000. And because many of these treatments are unproven, insurance will not cover them. Glybera, the first gene therapy approved in the Western world, clinically requires up to 70 injections and costs in excess of $1 million for treatment. Neither the high number of injections required nor the unreasonable cost is ideal, especially for patients. The industry will need to figure out how to lower both of these in order for this market to survive. The high cost of goods for a cell therapy treatment and how much it costs to make one have implications for both manufacturing development and clinical development.

“In the case of Dendreon, the Provenge treatment needed to be manufactured and dosed three times per patient at the cost of $100,000,” says Dr. Davies. “However, there is actually no clinical evidence that those three preparations and doses were needed. It’s quite possible that only one was needed, but the three-dose protocol was baked into clinical development very early on and became too much work to take out. If Dendreon had cost one-third of what it did, it’s very possible that the company wouldn’t have gone bankrupt.”

With cell therapies, the cell creates the product. This makes it a much more complex system to control from both a manufacturing and regulatory perspective. And while the industry and the regulatory agencies have limited experience with these drugs, the growing interest and investments into this field will eventually result in more experience across the board. As these executives and technical professionals continue to navigate this new landscape, the cell therapy market will most certainly evolve into one with endless possibilities.