Novartis Pullback Fuels Doubts on Novel CAR-T Cancer Therapy

  • Juno, Kite drop after Novartis’s move to fold unit, cut jobs
  • ‘Data on CAR-T has never been better,’ Juno CEO says

Novartis AG’s decision to fold a unit that was working on a novel cancer therapy casts doubt on other companies that are betting on what’s seen as one of the most exciting approaches to fighting the disease.

In a surprise move Wednesday, the Swiss drugmaking giant, a champion of the experimental therapy known as CAR-T, said research related to it would no longer be housed in a separate division, leading to 120 job cuts mostly in the U.S.

“It strikes me as they’re viewing this as an interesting state-of-the-art science project that may only have limited application in the real world from a commercial perspective,” said David Pinniger, who manages the Polar Capital Biotechnology Fund and doesn’t hold shares of Juno or Kite. “This smacks of someone big, knowledgeable and sophisticated just pulling back.”

Novartis’s decision to dissolve its gene and cell therapies unit added to recent setbacks for the promising therapy, in which a patient’s immune system cells are taken out, genetically engineered to recognize tumors, and reinfused. While the approach has shown high effectiveness in small trials, a fraction of patients have experienced severe side effects. Juno temporarily paused a leukemia study in July after three patients on one of its therapies died.

Novartis’ move sent shares of Juno Therapeutics Inc. and Kite Pharma Inc., the two biggest U.S. biotech firms focused on CAR-T, down in New York trading. Juno shares dropped 6.2 percent to $29.58, while Kite declined 1.9 percent to $57.62 at the close Wednesday. Novartis fell 0.9 percent to 77.40 Swiss francs in Zurich.

Novartis said it’s committed to the development of CAR-T therapies. The decision to for the specialized cell and gene therapy unit to be absorbed into other part of the company won’t affect a plan to apply for European approval next year for its CAR-T therapy, known as CTL019.

Both Juno and Kite were undeterred by the Swiss drugmaker’s reorganization.

“Data on CAR-T has never been better,” Juno Chief Executive Officer Hans Bishop said in an interview. “It’s not unusual in the history of our industry that big pharma struggles to innovate with new technology.”

Kite’s chief medical officer, David Chang, said he’s been encouraged by the rapid enrollment of the company’s trials.

“The news has no impact whatsoever on our plans,” he said. While having big pharma interested in CAR-T was helpful in bringing attention to the technology a few years ago, now “there’s more than enough critical mass to sustain and build the field.”

Promising CAR-T results from Novartis, Juno and Kite sent stocks soaring last year. The therapy wiped out an aggressive form of blood cancer in 93 percent of children and young adults in a Novartis 2015 study -- and 18 of 59 patients were still cancer-free after 12 months.

Lingering Questions

There are lingering questions about how widely used the therapies could become beyond certain blood cancers, as well as whether large-scale manufacturing of individualized cell therapies is feasible, according to John Schroer, sector head of health care at Allianz Global Investors, which he said holds small positions in Juno and Kite.

“In order for this to be a bigger, more adopted solution within hematology and perhaps oncology we need to see efficacy beyond” some blood cancers, Schroer said by phone. “And we need to get comfortable that the manufacturing hurdles, which still remain, can be satisfied.”

Some investors remain sanguine about CAR-T’s prospects.

“I didn’t bat an eyelash,” said Robert Nelsen, a managing director at Arch Venture Partners, Juno’s third-largest investor. “Companies do things for their own reasons. Given the number of companies that still call Juno, I don’t think there’s any lack of interest in the space.”

— With assistance by Kristen Hallam

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