Yahoo Finance

Todd Campbell: Kristine, we've talked about CAR-T on the show a few times, but we could have some new listeners, so we'll try to keep it nice and easy and [provide a] clean way of understanding it. It's a gene therapy, and the goal here is to re-engineer patients' immune systems so they can find and kill cancer cells. It does this by removing the T cell from a patient's body, re-engineering them so that when they are reinserted back into the patient's body, they can find specific proteins that are expressed on cancer cells, and that allows the T cells to kill them.

Harjes: Exactly. So, we got some very exciting news from several different CAR-T developers at ASH, but the first one we want to talk about today was the partnership between bluebird bio and Celgene on a drug called bb2121 that reported some absolutely incredible numbers in heavily pretreated multiple-myeloma patients.

Campbell: Right. We talked about this on the show back in June, Kristine, when they made a presentation on early stage phase 1 results, and just a handful of multiple-myeloma patients for this CAR-T therapy they're working on called bb2121. They updated the data from that trial at ASH, and wow. Once again, six months later, steals the show, delivering incredibly high overall response rates and complete response rates in a patient population that's frankly in dire need of new treatment alternatives. The specific numbers, for those keeping score at home, there was a 94% overall response rate to bb2121, and that was across 21 patients. On average, those patients had already tried and either didn't respond, or failed to respond, to seven previous therapies. So, you're talking about a 94% response rate in a patient population that has really, I don't want to say run out of options, but their options have become extremely limited given how many prior therapies they've taken.

Harjes: Right. These numbers, as you said, are absolutely stunning. The complete response rate was 56%. For reference, that is quite a bit for this population. In comparison, Johnson & Johnson won approval for their drug, Darzalex, with an overall response rate of 20% and a 3% complete response rate. Meanwhile, this is a drug that has annual[ized sales] of over $1 billion. So, if you compare that to the numbers that we're seeing -- in early stages, but still in fairly robust numbers -- for bb2121, and it's easy to see why investors are getting very excited. They sent the stock up about 15% over the past week. I believe that even after bluebird announced they were going to raise some money by offering new stock yesterday, which should raise them about $600 million before expenses, which is not surprising at all. This is very common, especially for clinical-stage companies, to do after releasing positive data that sent the stock up.

Campbell: Yeah, absolutely, it's a cheap way to get financing to do all sorts of great things, and what it really does is bolster this company's balance sheet. We mentioned at the beginning of discussing this drug that there's a relationship there with Celgene. Celgene has the license to bb2121, but bluebird bio can actually opt in, exercise an option, that will allow it to co-market and co-commercialize bb2121 in North America. I think that's one of the reasons that they're trying to shore up the balance sheet, so they have plenty of cash so they can exercise that option and then share in the spoils if bb2121's pivotal trial pans out as well as these early findings, and the FDA goes ahead and grants approval of it. It's a major market indication, it's ripe for disruption. The kind of numbers that we're seeing in the space are incredibly dramatic. We're getting the cart in front of the horse here, but I look at this and I say, the typical blueprint for developing multiple-myeloma drugs has been, we can get to market fastest if we go for these heavily pretreated patients. The FDA will expedite our review and we'll get on the market faster, then we can conduct studies in earlier lines of therapy that will allow us to treat more and more patients. So, you look at these response rates and start thinking into the future, and you're not really thinking about bb2121 just as a fourth-line multiple-myeloma treatment. You're thinking about the potential for it to disrupt the third line, the second line, who knows, the first-line treatment to someday. And since we're talking about an indication where you have multiple multibillion drugs on the market already, there's reason for excitement. It's understandable.

Harjes: And Celgene is a fantastic partner for bluebird to have. They have so much experience in this market already. They pretty much dominate the indication with Revlimid for the first line -- and the second line as well -- which makes about $8 billion per year. They have Pomalyst in the third line, which is about a $1.6 billion-per-year drug. So, even though 2121 would probably start out as a fourth-line drug, as you mentioned, and potentially work its way up, the companies are also working on developing a next-generation version of this drug, called 21217, which could hopefully be Revlimid's successor someday. So, really big potential for these drugs, and again, kind of early stage, but it's not hard to see why investors were so excited about this news.

Campbell: Yeah, there have been a lot of conversations about Celgene and potential patent exposure when Revlimid's patents end, and possibly getting some competition in there against Revlimid over the course of the next decade or so. I think this shows you what Celgene's strategy could be for maintaining its moat in this indication. As you mentioned, they get about $10 billion per year in revenue from multiple myeloma. That's a lot of their sales. So, they want to make sure they are the dominant player. bb2121 could theoretically allow them to do it. As an investing show, our listeners are probably wondering, what are the implications? Does this mean that bb2121 cannibalizes Celgene's Revlimid and Pomalyst sales? Or are other drugs impacted? My personal opinion is, no, not yet. Pomalyst is getting studied for second-line use, so it's trying to move up into earlier-stage treatment. I think initially, maybe the ones that are most threatened by a bb2121 potential commercialization (my guess: 2019 would be the earliest that you can see that) would be Darzalex, which we mentioned, it's a Johnson & Johnson drug, Amgen's Kyprolis, and possibly Bristol-Myers' Empliciti. Those drugs are also trying to migrate further into earlier-stage treatment, but they still generate a pretty good amount of their sales in the later lines.

Harjes: Yeah, absolutely. One other thing to keep in mind about bluebird is, this isn't all to their story. At their conference, they also released updates on their treatments for beta-thalassemia and sickle cell disease. But, the 2121 news is certainly what has caused the stock to jump. If you look at the company as a whole, they have tripled in value in the past year, which is pretty nuts. It's evidence of the great work that they're doing. Their market cap now stands at $8.4 billion. That holds a lot of hope, and they do have the robust pipeline to support that.

Let's keep talking CAR-T. I want to talk about one of my favorite companies, which is Juno Therapeutics. They did not have too great of a week, if you were to look at their stock chart, anyway.

Campbell: We just talked about bluebird bio and how they reported this gangbusters data, and shares went soaring. This was the opposite scenario. You had what I view to be pretty darn good results that were presented by Juno for its CAR-T in non-Hodgkin's lymphoma. Yet investors just crushed the stock and sent it crumbling lower. I think it's important for us to talk about this situation for people coming out of ASH, because they may be scratching their heads and wondering what's going on here. Is the data good or is the data not good, and what does this really mean for Juno?

Harjes: The drug in question is JCAR017, which is a little bit behind its competitors -- [laughs] a good bit behind its competitors -- in terms of how close it is to market. For reference, you have approved drugs Yescarta and Kymriah working in a similar space, they're already out there and approved and being marketed, whereas 017 is not quite there yet. Juno reported that 50% of patients at the six-month mark in their trials were in complete response to the drug, and they reported there was far better safety than you saw in the trials for Yescarta and Kymriah. But I think the reaction that the market had to the news really has everything to do with how high expectations were. There were rumors of a response rate as high as 70%. So, even though these numbers look fairly good and very comparable to those numbers for efficacy for Yescarta and Kymriah, and better on the safety front, I think there's a lot of nervousness and unease that that's not going to be good enough to differentiate this drug.

Campbell: Yeah. We had a complete response rate for patients with advanced non-Hodgkin's lymphoma 50% at the six-month mark. What was interesting to me was you had 80% of the patients that were in complete response at the three-month mark were still in complete response at the six-month mark. Then, from the six-month mark to the data cutoff for the presentation, 92% remained in complete response. So, we're talking a pretty good, durable response to JCAR017. And if you look at how that matches up to Yescarta, which, again, is already approved in this patient population, and Kymriah, which has a pending application -- most people assume that's going to get approved in this indication -- if you look at how that matches up on an efficacy standpoint, it's pretty solid. You get 30%-40% complete response rates over a six-month period or so out of both of those drugs. So, the question then becomes, if you didn't have as big of a separation as maybe the whisper number out there was in response rates, is the safety advantage going to be enough to convince doctors to use JCAR017 vs. a Yescarta or a Kymriah in these patients? That's really what it's going to come down to if this drug does eventually make it to market. It's going to become: OK, I can get solid efficacy out of these three CAR-Ts, but is one of these safer for my patients to use than another one? In my view, the data that was presented on JCAR017 says yes. It does appear safer. There was a very low occurrence rate of neurotoxicity and cytokine release syndrome, which are two severe adverse events that have, I don't want to say plagued, but are much more common in the trials for Yescarta and Kymriah. So, I think that if this drug does make it across the finish line, it can indeed carve out a fairly substantial pool of the money. But I guess the end result here is, after looking at the data, there were some question marks about how much of a slam dunk it could be if it gets to market. And because of that, and the market hating uncertainty, you had a lot of "sell the news." Buy ahead of it, high expectations, report comes out, people sell it and move on to the next idea.

Harjes: I agree with you, but I think there are two more things that are making investors kind of nervous here. One is, there have been some accusations that Juno enrolled healthier patients in its trials than its competitors did, which of course the company says is not the case. The other point is there is a renewed concern that the viral-vector supply could be limited. This is a key component to how gene therapies work. Each virus must be custom-made for the treatment. Essentially how it works is that you input the working gene into an inactive virus and then give it to the patient in hopes that the working gene will start to produce whatever the protein is missing or start to make up for the faulty gene in the patient. But the virus is absolutely essential to this process. And it turns out that very few companies have both the facilities and the expertise to make them, particularly given the huge demand because of this surge in gene-therapy research. For example, Novartis signed a contract years ago with Oxford BioMedica just to give them the right to get these viruses for their gene-therapy research. It ended up giving Oxford Biomedica around $200 million plus royalties. And that's for a treatment that only a few hundred patients will receive. So, this is a really competitive market that, honestly, I just recently learned about the shortage and demand here. I find it fascinating.

Campbell: Yeah. The level of research and development activity going on right now in gene therapy is very much so straining the availability of these viral vectors. You have a few different viruses that are inactivated that are ideal candidates for use in gene therapy. And like you mentioned, there aren't very many companies that go out there and do it. All of these companies are taking a different approach. If you Google "viral vector Todd Campbell Motley Fool," you'll find an article that I put out there maybe two weeks ago on this subject, and it will go into a lot more depth than we can give on the show. But I guess the takeaway here is, companies are taking different approaches to try to lock up that supply, because the last thing you want is a ton of demand and not being able to produce enough of these gene therapies to be able to address all the patients that you need to be able to address. So, you have a company like bluebird bio, for example, recently buying their own manufacturing plant -- they're going to try to bring their own vital production in-house. Juno is still contracting for its viral vectors. It's obviously in tight supply, which means that these producers of viral vectors have pricing power have some pricing power, they can negotiate some good deals, like the one that you just mentioned with Novartis and Kymriah. And that can obviously be costly to these companies. So, that's something that, you're right, it's a really fascinating and interesting unintended consequence. Eventually, we'll have plenty of manufacturing to handle all of this. But for now, it is a little bit capacity constrained. The other thing I think people should know about Juno's program, the JCAR program, is that it's also partnered up with Celgene. So, Celgene has the partnership with bluebird bio and bb2121 that we just talked about, it also has the ex-North America and China rights on JCAR017. So, if this drug does make it to market -- and again, we're thinking this could come to market in 2019 -- then Juno will benefit in North America, and it'll collect royalties from Celgene on ex-U.S. sales.

Harjes: I would love to be Celgene just sitting back and enjoying this conference, watching all of your partners present their data. Maybe you're a little bit nervous because you do get the volatility that we've seen. But I feel like, on the whole, they're just sitting back like, "yeah, we have the best partnerships out there," and these companies are absolutely killing it.

Campbell: Yeah. And it shouldn't be ignored, either, Kristine, we should probably throw this out, too, that Celgene just recently upped their position -- they own about 10% of Juno's stock. So, Celgene will benefit somewhat from the North American sales, just from their investment in the company. Of course, that raises all sorts of questions. Could Juno go out and buy -- whatever. We don't know, those are all just rumors and speculation.

Harjes: Right. For our last ASH update for the day, we're moving away from blood cancer and toward hemophilia. We want to talk about, as your phrased it, Todd, the showdown between two different companies -- Spark Therapeutics, their ticker is ONCE, and BioMarin, their ticker is BMRN. First off, I want to explain the ticker for Spark Therapeutics, because when this clicked in my mind, I was like, oh, that's pretty cool!

Campbell: [laughs] It's great, right? Brilliant marketing.

Harjes: Yeah. Their ticker is ONCE, and that, I presume, is because gene therapy, which is what they work on, only needs to happen once and the patient is cured for life. So, if you're thinking about something like hemophilia, a typical hemophilia patient will need to regularly get treatment their entire life, which is very expensive. But, if you can treat the underlying cause of it at the genetic level, that happens just once. Pretty cool.

Campbell: It's potentially game-changing, what gene therapy may do for hemophilia patients. It's exciting news for patients, it's exciting news for caregivers, it's exciting news for investors. It really is a shift in paradigm and how we approach treatment of this disease. Just to give listeners a little bit of background, we have two types of hemophilia, hemophilia A and hemophilia B. Hemophilia A is much more common, affects about 150,000 people worldwide. B is less common, but still common enough -- 30,000 or so patients globally. Companies are developing gene therapies that can eliminate, based on trials so far, the likelihood of bleeds in these patients. And that's just amazing. In hemophilia A and B, patients can have spontaneous bleeds if they cut themselves. Their blood does not contain the coagulant clotting factor that's necessary to clot their blood. So, there are so many consequences to that which negatively impact their quality of life. If you have a surgery, you have to make sure that you do all sorts of prep work ahead of time. If you hurt yourself, cut yourself, you have to take that into consideration, too. There's also joint damage that occurs over time because of the spontaneous bleeds. So, like you mentioned, you have current treatment that's prophylactic, and you're receiving infusions of the missing clotting factor. And what these gene therapies aim to do is, using those viral vectors we talked about earlier, introduce a functional gene that can produce the missing factors for these patients in a one-and-done injection. And that could be quite remarkable.

Harjes: Yeah. When you're measuring the outcomes of these drugs, you have two things that you're looking at. First of all, you have the number of bleeding events per year. And that's really what matters most -- can we keep these patients out of the hospital for their bleeding events, can we improve their quality of life, everything that goes along with that. But then, you also have what's an intermediary endpoint, which is, is there an increase in this coagulant factor, the one that is defective or missing, deficient, in any way? The drug is supposed to work by making more of this coagulant factor, so it makes sense that you would measure it. But really, what matters more is the bleeding events. At ASH, Spark Therapeutics released data about their drug SPK-8011, which is in hemophilia A, and there was a huge sell-off. Not because it couldn't control bleeding, it did -- there was a 100% reduction in bleeding events -- but because of concern over the factor VIII production, which is the clotting factor that this drug is supposed to increase.

Campbell: Yeah. You have the activity of SPK-8011, it ranged very widely, from 9% up to 37%, depending on where you were looking at it --

Harjes: Meaning 30% of those normal levels.

Campbell: Right. In a normal person, that's usually defined as 50% activity to 150%. It's kind of bizarre. Think of it this way: Most clinicians, if your activity is at 12% or higher, they're going to view you as not high-risk for bleeds. The people who are enrolling in these trials conducted by BioMarin and Spark, they have less than 1% activity. So, in BioMarin's case, you had activity levels jump to 49%. So, everybody looks at that and says, BioMarin's drug -- which I'm not even going to bother trying to pronounce, it's just ridiculous how many letters are in this [valoctocogene roxaparvovec].

Harjes: You can go with the earlier clinical name, which is BMN 270.

Campbell: OK, perfect. We're going to go with BMN 270. That did eliminate bleeds, just like Spark's 8011. But the activity jumped to 49%. So, think about that. You have 49%, which is just below that 50% cutoff for what's considered normal. We already know that 12% means you're probably not at significant risk for bleeds. Well, 8011, being between 9% and 37%, that just raised question marks for people. They looked at it and said, yeah, it eliminated the bleeds, but is BMN 270 more robust? Is it the better drug? I think it's too early to say that. And the reason that I make that claim is, BioMarin is in the lead, their study has been going on, it's enrolled more patients, they're more advanced in developing their hemophilia A gene therapy than Spark is. Spark is still optimizing the dosing of its drug. And it believes that through that optimization, until the next data readout, they're going to be able to boost those activity levels. From a clinical standpoint, most clinicians aren't going to really care, because all they ultimately care about are the bleeding rates falling. So, I think this was investors digging into the data trying to figure out, is one drug better than another better than another. I think it's too early to say. As a result, my personal view is that the reaction in Spark Therapeutics' shares, which tumbled over 30% after the ASH presentation, was an overreaction, and maybe even creates a buying opportunity. The real winner, no matter what, though, Kristine, I'm sure you'll agree, is patients, because both these gene therapies show that we're getting much closer to a one-and-done treatment of this condition.

Harjes: It works. It's really incredible. I love what Spark is doing. This isn't their only drug, which also makes me very surprised, but they lost a third of their market cap just about this one small detail of one of their drugs. They're also, for example, working in hemophilia B with Pfizer (NYSE: PFE) on another drug that also had very promising results from their phase 1/2 trials with highly controlled bleeding, again. They're also working outside of hemophilia. They have a drug called Luxturna, which is for blindness, a cure for a genetically defined set of patients who are blind, and that's expecting approval by Jan. 12. Meanwhile, the advisory committee to the FDA unanimously recommended approval of that drug. So, I would be downright shocked if it didn't get approval. This is a drug that restored vision in 90% of patients for up to three years in trials, whereas previously there were no currently approved drugs for this treatment. So, I really do think that what they're doing is absolutely incredible. And with that 33% sell-off, I'm personally very interested in the stock.

Campbell: I think it's fascinating. I think you make a very good point about Luxturna. It's not a very common thing, but you could treat 1,000 patients, and people are saying this could be a $1 million one-and-done drug therapy. So, even if you take net pricing and you think, maybe not everybody gets treated with it, you're still talking hundreds of millions of potential dollars in revenue for Spark Therapeutics on approval, and it can then use that money to help fund other programs, like the program in hemophilia. Hemophilia B is really intriguing to me, as well, because BioMarin is not working on hemophilia B right now. You have to worry about uniQure instead, which is another company developing a hemophilia B gene therapy. But I think Spark's relationship with Pfizer gives it an edge in that indication as well. I'm very intrigued by this stock as well, especially given the drop.

Harjes: Yeah. I think the point about Pfizer giving it its blessing is also very promising. We've said this before on the show, but that's a nice sign of faith, that a larger company is looking at a smaller company's pipeline and saying, yeah, I want a piece of that, what you're doing looks really promising.

Campbell: Kristine, don't forget, Pfizer markets BeneFix, which is one of the leading hemophilia B drugs right now. So, it already has the sales team in place.

Harjes: Exactly, it already has those relationships, it knows what it's doing, and its team understands the science. So, they are the best people equipped to look at a company that has a pipeline in the space and give it the thumbs-up.

So, it has been a very exciting week due to this conference. It's always so much to do conference recaps with you, Todd. Thanks so much for being here today!

Campbell: My pleasure! Thank you for having me!

Harjes: As always, people on the program may have interests in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. This show is produced by Austin Morgan. For Todd Campbell, I'm Kristine Harjes. Thanks for listening and Fool on!

Kristine Harjes owns shares of Johnson & Johnson and Juno Therapeutics. Todd Campbell owns shares of Celgene and Pfizer. His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Bluebird Bio, Celgene, and Johnson & Johnson. The Motley Fool recommends BioMarin Pharmaceutical and Juno Therapeutics. The Motley Fool has a disclosure policy.