Interesting article on CAR-T therapy from Wall Street Journal
By Charley Grant
Feb. 8, 2019 7:30 a.m. ET
A major investment by the drug industry isn’t turning out the way investors hoped.
Drug companies have spent big on chimeric antigen receptor T-cells, or CAR-T, cancer therapies. The treatment involves a process whereby a patient’s T-cells are extracted, modified and reinserted into the body to fight cancer.
The treatments are exciting from a scientific point of view and have provided significant clinical benefits to a small number of patients with severe and uncommon forms of cancer. Turning the therapy into a great business for drugmakers, however, hasn’t been smooth.
Gilead Sciences shares fell Tuesday, after the company unveiled disappointing fourth-quarter results on Monday afternoon. One reason for the negative reaction is that Gilead took an $820 million impairment charge related to research costs from its 2017 acquisition of CAR-T specialist Kite Pharma.
That wasn’t the only bad sign for that deal, for which Gilead paid $11 billion in cash. Gilead has booked only $271 million in revenue from Yescarta, the lead drug it acquired in the deal.
Gilead is hardly alone: Novartis booked $76 million in 2018 sales from a similar drug, Kymriah. Not to be outdone, Celgene spent $9 billion last January to acquire CAR-T specialist Juno Therapeutics. Juno’s drug candidates have yet to reach the market.
There are good reasons for the slow start. Cost is one reason: The drugs themselves have per-treatment list prices of $373,000 and up. That tab runs much higher once extras like hospital stays or ancillary prescription medicines are included. The drugs also can have dangerous side effects. Only a relatively small number of hospitals are certified to administer the treatment because it is complicated and labor intensive. Clinical trial results needed to expand the market to more common forms of cancer, such as solid tumors, are likely years away.
The situation is set to improve. Gilead said on a conference call this week that Yescarta sales could double in 2019 as more patient centers come online. Novartis also had an upbeat message about Kymriah’s growth prospects back in January. Drug development can evolve quickly, and it is possible that the next generation of CAR-T treatments will have much better commercial prospects.
Until evidence emerges, though, Wall Street analyst estimates seem too high. Analyst consensus calls for $1.6 billion in sales of Yescarta and $851 million in Kymriah sales by 2023. That implies 43% and 61% annual sales growth for Gilead and Novartis, respectively, over the next five years.
Pharma investors should be watching carefully. Many of the higher-profile drugs in development that excite Wall Street, such as new gene-therapy medicines, are designed to treat a fairly small number of patients with a one-time treatment. A slow start for CAR-T isn’t a great sign for the overall business model.
There are lessons for management teams as well. Growth is in short supply across the industry. The slow development of the CAR-T market shows that big drugmakers can’t necessarily solve that problem by simply opening their wallets.
