Cell therapies, which involve modifying immune cells to hunt down cancers, have always been a gamble. They eliminate cancers that are otherwise nearly untreatable, but they're complicated, expensive, and potentially dangerous.
The approach got a Big-Pharma benediction a few years ago when Swiss giant Novartis jumped in with an early, major, and highly touted investment.
But mere months before it's expected to submit its first cell therapy to the FDA for approval, Novartis is having second thoughts. Endpoints News reported Wednesday the company is disbanding an independent unit dedicated to gene and cell therapies. It's redeploying most of the staff and letting others go. The self-styled reorganization is a worrying vote of diminished confidence in an approach that's still risky even as it approaches the market.
Shares of cell-therapy leaders Kite and Juno fell 1.9 and 6.2 percent, respectively, on the news, even though it means a major competitor is stepping back.
This comes less than two months after several drug-related patient deaths briefly halted one of Juno's clinical trials.
Novartis needs new cancer drugs as its blockbuster Gleevec loses patent protection. Analysts expect sales of that drug to fall from $4.7 billion in 2015 to less than $3 billion this year. Novartis says it is still committed to cell therapy and to launching its lead candidate to treat a pediatric blood cancer, which could be approved by the FDA next year. It argues not having an isolated unit will make development of these drugs "more efficient."
Don't buy it. Dissolving the group, letting people go, and giving oversight of expensive and complex programs to leaders who have other priorities sure feels like a pullback. The company's current projects may get less love, and future efforts may have a more difficult path forward.
Novartis is a major cancer drugmaker and can shrug off setbacks that would devastate smaller peers; the company produced $49.4 billion in revenue in 2015 and spent $8.3 billion on R&D, more than the combined market cap of Kite and Juno. It's better funded for marketing, regulatory issues, and scaling up a difficult manufacturing process.
Its publicly disclosed cell-therapy test results have looked good. But class-wide risks may have given it pause, including safety and efficacy problems and limited commercial potential, at least for the first generation of such drugs.
Those and other concerns make these drugs vulnerable to less-complicated and cheaper competitors. Novartis has other options, having made a deal that could be worth as much as $2.56 billion in up-front and milestone payments with a company called Xencor, which takes a different approach to cancer treatment. Unlike Juno and Kite, Novartis isn't all-in on one approach and doesn't have to be.
Time will tell if Novartis is truly pulling the parachute on cell therapy or just dragging its feet a bit. At the very least, the company's move from full-throated, cure-touting-on-a-magazine-cover bullishness in 2014 to cutting jobs amplifies already cacophonous doubts.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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