Cell Genesys/Takeda: Not Quite Validation for Cell Therapy

After enduring years of investor and partner skepticism, cell therapy has finally gotten what should be its validating deal: Cell Genesys's $50-million-upfront worldwide alliance with Takeda for Phase III GVAX prostate. But none of the companies who discussed licensing the product focused on the fact that it is a cellular therapy , regarding it as a prostate cancer treatment that happens to be a cellular therapy. Until GVAX delivers definitive and positive Phase III data, other cell therapy companies (like Dendreon and Antigenics) shouldn't get their partnering hopes up.

There is a Charlie Brown quality to cell therapy. After enduring years of investor and partner skepticism, one of its long-time players finally signs a major and lucrative worldwide deal with Takeda Pharmaceutical Co. Ltd. But it has barely a week to savor the attention: Takeda announces an $8.8 billion acquisition of Takeda Oncology [See Deal]

Still, if Takeda’s alliance with Cell Genesys Inc. [See Deal] has now been overshadowed by its Millennium acquisition, the value–and message--of the cell therapy deal remain.

Big Pharma’s appetite for large-molecule platforms is by now almost cliché (See "Pharma’s New Follow-On Strategy (Also see "Pharma's New Follow-On Strategy" - In Vivo, 1 Feb, 2008.), IN VIVO, February 2008 and "Big Pharma's Leap into Biologics: Bridging both Scientific and Cultural Gaps," IN VIVO, October 2007 (Also see "Big Pharma's Leap into Biologics: Bridging both Scientific and Cultural Gaps" - In Vivo, 1 Oct, 2007.).) But in general, "large molecules" mean antibodies and proteins. Oligonucleotides, particularly RNAi platforms, have generated considerable interest but by and large that world, among technologies without approved products, has been pretty much alone.

So does Takeda’s license to Cell Genesys’ Phase III prostate-cancer cell therapy signal any broadening of interest in new large-molecule immunology platforms?

Not so clear. Certainly, it’s a vote of confidence in Cell Genesys--a "truly validating deal," noted Joe Pantganis, an analyst with Canaccord Adams, on the company's March 31 conference call discussing the news. The alliance is the largest recent cell-therapy agreement–a $50 million upfront fee and another $270 million in clinical, regulatory and commercial milestones. Cell Genesys off-loads to Takeda the majority of the development and virtually all the commercial costs. Takeda is taking on "external" costs related to GVAX prostate–which basically makes Cell Genesys’ non-employee expenses, like CRO charges and product supply, a Cell Genesys responsibility per the contract. Assume Takeda will take on somewhere north of $40 million worth of costs this year; that’s a good chunk of Cell Genesys’ total cash burn, which was about $90 million last year and, before this deal was announced, was forecast to be about $105 million in 2008.

Meanwhile, if GVAX prostate works, Cell Genesys will keep plenty of upside–royalties start at 20% and increase at specific sales levels up to 50% before declining to 30%. Sales have to hit extraordinarily high levels before that rate starts to drop, hints CEO Steve Sherwin.

And while $50 million up front isn’t an astonishing amount for a Phase III program, seen in context of other rights, it isn’t bad. For example, Novartis AG paid $75 million up front, and will add another $25 million on Phase II filing, for similar commercial rights to Antisoma PLC’s Phase II small-molecule AS1404 for squamous cell lung cancer [See Deal]. The up-front alone is 50% bigger than what Cell Genesys got.

But Novartis takes over all the development responsibility–something biotech investors increasingly dislike because they feel large companies will ignore niche indications to which a product might be better suited, and which a biotech would be more likely to pursue. (See "Why Investors Don’t Like Biotech Alliances," The INVIVO Blog, March 26, 2008.) In its Takeda deal, Cell Genesys has a potentially more than equal voice in development–50% of the members on the joint development committee, which it chairs for the first year.

But as good as this deal is for a cell therapy company, Sherwin himself isn’t trumpeting cell therapy–though that’s exactly what GVAX is. The treatment is comprised of cancerous cells from two different cell lines taken from very advanced and malignant prostate tumors, irradiated so they can't multiply after injection into the patient. In theory the cells display many of the common antigens found in refractory prostate cancer. The hope is these antigens will trigger the patient's immune system to start recognizing these cells as a threat, clearing the cancer from the body. But to be effective, the immune system needs a little help. As a result, Cell Genesys has also engineered its GVAX Prostate cell mixture to spit out GM-CSF, an immune stimulator which, combined with the antigens, should theoretically lead to greater efficacy than the irradiated cells alone.

Nonetheless, says Sherwin, none of the companies who discussed licensing the product—which means, apparently, that Takeda wasn’t the only bidder--saw this as cellular therapy; rather, they viewed it as a way of treating a particular cancer–"as a prostate cancer treatment that happened to be a cellular therapy," he says. Takeda itself, he maintains, saw the deal first as one about cancer, in which it wants to be a leader; then about prostate cancer, where it had been a pioneer with leuprolide (Lupron) (a product it recently had to cede to Abbott Laboratories Inc. as part of the dissolution of the two companies’ decades-long TAP joint venture); and finally about immunotherapy–in which it would also like to play a larger role. But if this cell therapy is immunotherapy, so are monoclonal antibodies, which have taken a far bigger chunk of Takeda’s attention, and money—such as via their $640 million two-part deal with Amgen Inc. [See Deal] Indeed, according to Windhover's Strategic Transactions Database, Takeda has signed nine large molecule alliances since 2006, most of them focused on antibody technology.

Sherwin has reason to prefer having his deal seen as validating Cell Genesys rather than cell therapy. Investors haven’t forgotten the huge run-up and run-down of Dendreon Corp. shares when its Provenge cell therapy got a positive nod from an advisory committee though its two Phase III studies missed the primary endpoint target of time to progression and secondary endpoints of clinical and pain progression and treatment failure. (See "A Look Inside the Provenge Decision: Who's In Charge at FDA?," The RPM Report, September 2007 (Also see "A Look Inside the Provenge Decision: Who's In Charge at FDA?" - Pink Sheet, 1 Sep, 2007.).) The company valuation bulged beyond $1.8 billion–before crashing down when the FDA disagreed, issuing an approvable letter instead. Meanwhile, with no partner in sight, having burned $102 million last year, and—at that rate--with barely a year’s worth of cash left in the company, Dendreon raised $47 million in a fairly dilutive stock-and-warrant deal [See Deal]

Agenus Inc., too, had to take some fairly painful financial therapy to keep itself alive. Its unpartnered vitespen (Oncophage) patient-specific cancer therapy (Cell Genesys’ GVAX and Dendreon’s Provenge are manufactured from their own non-patient-specific cell lines) appears to be relegated to the Russian market, where it was just approved. Apparently, the data isn’t yet good enough for the FDA. Thus the company, which burned $33 million in 2007, raised $26 million in a stock-and-warrants PIPE. [See Deal]

As for the blockbuster applications for cell therapy–replacement therapies like stem cells, they’re at least a decade away from medical and commercial validation (See "Stem Cell Summit 2008: Moving from Process to Product," Medtech Insight, March 2008 (Also see "Stem Cell Summit 2008: Moving from Process to Product" - Medtech Insight, 1 Mar, 2008.).)

Cell Genesys isn’t out of the woods. There’s not a lot of confirmative Phase II clinical data on GVAX, and results from the first of its two Phase III trials, VITAL-1, aren't expected until the second half of 2009 at the earliest. But Takeda could afford the gamble—indeed, it’s peanuts (particularly with the strong yen and weak dollar) relative to the Millennium deal. And if GVAX works, the value of Cell Genesys’ earlier-stage programs will jump. Takeda’s bet will have paid off, and proteins will have company among deal-ready large-molecule platforms.

Ellen Licking and Roger Longman