BMY - 2seventy Bio: KarMMa-3 Finally Releases Positive Results

2023-03-09 08:45:09 ET

Summary

• 2seventy Bio's strong focus on cell therapy-based combinations for solid tumors positions them as a potential leader in the immuno-oncology market.
• Recent positive results from the KarMMa-3 study demonstrate the potential of the company's first-in-class anti-BCMA CAR T cell therapy, Abecma, to change the standard of care for multiple myeloma.
• Abecma exhibited a consistent and predictable safety profile in the KarMMa-3 study, with mostly low-grade occurrences of cytokine release syndrome and neurotoxicity.
• The company's collaboration with Regeneron will help accelerate the development of promising therapies with its unique cell therapy engineering capabilities.

Despite the highly competitive nature of the immuno-oncology cell therapy market, 2seventy Bio (TSVT) is poised for success. The recent collaboration with Regeneron (REGN) has enabled an extensive and fast-tracked development strategy for innovative combinations of cell therapy for solid tumors. This collaboration will make use of 2seventy Bio's distinctive expertise in cell therapy engineering and early-stage development, along with their recently constructed on-site clinical cell therapy production facility, together with Regeneron's differentiated antibodies.

2seventy Bio's approach to cell therapy engineering and early-stage development is what sets it apart from its competitors. Unlike other companies in the space, 2seventy Bio's platform can test CAR-Ts with novel biologics in multi-arm proof of concept clinical studies. This approach is not only more efficient, but it also increases the chances of identifying and developing the most transformative therapies possible. With its undervalued metrics compared to the sector median, 2seventy Bio is a compelling investment opportunity for those who believe in the transformative power of cell therapy.

KarMMa-3 Study Yields Positive Results

Bristol-Myers Squibb (BMY) and 2seventy bio have released positive results from their KarMMa-3 clinical trial, which evaluated the effectiveness of Abecma versus standard combination regimens in adults suffering from relapsed and refractory multiple myeloma. The study involved patients who had undergone two to four prior lines of therapy, including an immunomodulatory agent, a proteasome inhibitor, and an anti-CD38 monoclonal antibody, and who were refractory to their last regimen.

The study results revealed a statistically significant and clinically meaningful improvement in the primary endpoint of progression-free survival ((PFS)) compared to the standard regimens. The median PFS for patients who received Abecma was 13.3 months, while that for those who received the standard regimens was only 4.4 months. Remarkably, Abecma is the only chimeric antigen receptor ((CAR)) T cell therapy that has demonstrated its superiority over standard regimens in triple-class exposed relapsed and refractory multiple myeloma in a randomized, controlled Phase 3 trial.

Furthermore, the study's key secondary endpoint of overall response rate also met statistical significance, with the majority of patients treated with Abecma achieving a response, and 39% of them attaining a complete response or stringent complete response. The responses with Abecma were durable, and clinical benefit was consistently observed across difficult-to-treat subgroups.

The positive outcomes of the KarMMa-3 study reveal the clinical benefit of using Abecma in patients with triple-class exposed relapsed and refractory multiple myeloma across lines of therapy, offering the best chance for lasting disease control. Additionally, the study demonstrated a consistent and generally predictable safety profile, with mostly low-grade occurrences of cytokine release syndrome ((CRS)) and neurotoxicity. These results highlight the potential of Abecma to revolutionize the standard of care for triple-class exposed multiple myeloma in early lines.

Collaboration With Regeneron

The recent announcement from 2seventy bio regarding their expanded collaboration with Regeneron has generated excitement among the company and its investors. This collaboration aims to accelerate the development of novel cell therapy-based combinations for solid tumors. With the help of Regeneron's differentiated antibodies and 2seventy bio's unique cell therapy engineering and early-stage development capabilities, including their newly built in-house clinical cell therapy manufacturing facility, the collaboration is expected to yield positive results.

The investment of $20 million equity at a 50% premium and another approximately $20 million in near-term pre-clinical and clinical milestones will provide a significant financial boost to 2seventy bio. This demonstrates Regeneron's confidence in the company's potential and endorses their capabilities. Furthermore, the renewed collaboration will enable 2seventy bio to leverage their end-to-end scientific and manufacturing cell therapy platform to test CAR-Ts, including enhanced CAR-Ts, in combination with innovative biologics in multi-arm proof of concept clinical studies. This presents a significant opportunity for the company to accelerate the development of their pipeline and increase the chances of delivering promising treatments to patients with solid tumors.

The cost-sharing agreement is also a significant development, as Regeneron has agreed to cover 75% of certain preclinical costs necessary to study combinations and 100% of the costs for the arms of clinical studies that include Regeneron agents through regulatory approval. This agreement will reduce the financial burden on 2seventy bio, thereby reducing overall risk to the company and allowing them to pursue drug research with minimal external concerns.

Balance Sheet Breakdown

The company's revenue may have decreased slightly for the three- and nine-month periods that ended September 30, 2022, but this was largely due to a decrease in ide-cel revenue and royalty and other revenue. Importantly, the company's collaborative arrangement revenue for Abecma was still robust at $4.1 million for the third quarter. This is a positive sign, considering that Abecma is a groundbreaking treatment for multiple myeloma and has the potential to be a significant source of revenue for the company in the future.

Furthermore, 2seventy Bio's partnership with Bristol Myers Squibb is a major asset. Under the partnership, the company and BMS share equally in all profits and losses related to the development, manufacture, and commercialization of Abecma in the United States. BMS reported total U.S. revenues of $75 million for Abecma for the three months ended September 30, 2022.

The company's research and development expenses have been steady, with a slight increase in the third quarter driven primarily by facility-related costs and collaboration research funding. While this may be concerning to some investors, it's important to remember that research and development is a necessary expense for any biotech aiming to bring new products to market.

On the other hand, both the three- and nine-month periods have seen decreases in selling, general, and administrative expenses. This is due to 2seventy Bio's attempts to reduce their operating costs, as well as employee compensation expenses. These cost-saving measures demonstrate that the company takes its financials seriously and is determined to increase profitability.

In spite of having a net loss of $67.9 million in the third quarter, 2seventy Bio still has enough cash reserves and marketable securities totaling $324.5 million. This gives them the freedom to continue investing in research and development, while also considering potential partnerships and acquisitions.

Countering Potential Risks

One current risk is the potential for adverse events associated with these immuno-oncology cell therapies, such as cytokine release syndrome ((CRS)) and neurotoxicity. These can be severe, requiring close clinical management and monitoring. Additionally, there is a concern that the high cost of these therapies may limit access to them for patients, leading to issues related to reimbursement and pricing pressures.

There is the risk that tumors may become resistant or not respond to current therapies, resulting in a relapse or resistance. This means there needs to be further research into new types of treatments. In addition, another potential risk worth considering is the competition other cell therapies, such as TCR and NK Cell Therapies, will bring. Although these are still currently in their development stages, promising results have already been seen from preclinical studies, signaling they could soon provide more treatment options.

2seventy Bio is well-positioned to address these risks. Its focus on dual-targeting CAR T-cell therapies and proprietary Dimerizing Agent Regulated Immunoreceptor Complex (DARIC) T-cell platform could help to address the issue of resistance. Regarding the long-term concerns with pricing pressure, the company's collaboration with Regeneron and its in-house clinical cell therapy manufacturing facility could also help to reduce costs and improve access to these therapies.

That said, it is also important to note that, although 2seventy Bio may be unique in its sector, at the end of the day it is still involved in immuno-oncology. The company is subject to the same risks that affect all others competing in the same market, and there is no way to avoid that. This includes risks like approval delays, poor trial outcomes, and new developments in the benefits and dangers of associated therapies through academic research.

Well-Equipped For A Competitive Space

One of 2seventy Bio's key competitors is Kite Pharma, which was acquired by Gilead Sciences (GILD) in 2017. Kite is known for its CAR-T cell therapies, which involve engineering a patient's T cells to recognize and attack cancer cells. While Kite's therapies have shown impressive results in some patients, there have been concerns about their safety and potential for toxic side effects.

On the contrary, 2seventy Bio employs a more advanced method of cell engineering, which tackles potential reasons for the failure of anti-CD19 CAR-T cell therapy using more sophisticated techniques. Their bbT369 therapy involves dual-targeting (CD79a/CD20), split co-stimulation signaling, and the disabling of CBLB through a direct gene-edit. This approach has multiple layers and is intended to enhance the efficiency of CAR-T cell therapies, while also reducing their harmful effects.

Juno Therapeutics is another competitor that was acquired by Celgene in 2018. They are known for using gene editing technologies to enhance the safety and effectiveness of CAR-T cell treatments. Nevertheless, their method still requires utilizing the patient's own T cells, making the process costly and lengthy. 2seventy Bio, on the other hand, has developed a proprietary Dimerizing Agent Regulated Immunoreceptor Complex (DARIC) T cell platform, which allows for the production of off-the-shelf cell therapies that can be readily available for patients.

Valuation

To preface this, biotechs are always tough to value from a numerical standpoint because of their inherent value being tied primarily to the success of their primary candidate and overall pipeline progression. That said, a comparison directly to other clinical-phase biotech companies would still shed some useful information. Given this, I would argue that 2seventy Bio is undervalued based on its forward Price/Book ratio of 1.66 compared to the sector median of 2.62. A low price/book ratio is always impressive for research-heavy biotechs, in my opinion, and shows that 2seventy Bio is in a decent spot as far as pure value is concerned.

When considering the valuation of 2seventy Bio, an important factor is the company's financials such as its balance sheet, revenue growth, and profitability. As discussed earlier, despite being a relatively young company, it has shown very promising potential with its approach to cell therapy engineering and early-stage development capabilities.

The Verdict

2seventy Bio's current financial outlook is promising, with steady revenue growth and a solid balance sheet. The company's strategic partnerships and investments also indicate that there is confidence in its long-term potential for success. Overall, the immuno-oncology cell therapy market is expected to continue to grow, and 2seventy Bio is well-positioned to capitalize on this trend.

There is always some risk when investing in biotech companies, however, the possible benefits of 2seventy Bio could be immense. Having an impressive array of promising treatments and a dedication to advancement, I definitely hold a bullish view on the company's outlook in the near future.

For further details see: