Celgene Gave This Tech Back to Editas Medicine, but It Could Prove Valuable – The Motley Fool

In the middle of November, Editas Medicine (NASDAQ:EDIT) and Celgene (NASDAQ:CELG) announced changes to a development pact originally formed in 2015 with Juno Therapeutics, which is now part of Celgene. The agreement was amended in 2018, too, so the fact that changes were made wasn't necessarily big news. Editas received a $70 million upfront payment for executing the amended agreement, which was interpreted as the main takeaway from the announcement.

The announcement barely registered with investors and few gave it much thought for too long, especially after promising early results from the first clinical trials using a CRISPR-based medicine were announced by CRISPR Therapeutics days later.

But revisiting the amended collaboration agreement, and specifically what changes were made, hints at the long-term development plans of Editas Medicine. In short, it now has full control over an important class of immune cells. Whether that means the gene-editing pioneer lands another major development partner or goes full-steam ahead alone, investors can't overlook the significance.

Image source: Getty Images.

The basic scientific goal of the collaboration hasn't changed. Editas Medicine will use its gene-editing technology platform to engineer T cell receptors (TCR), while Juno Therapeutics will leverage its immunotherapy leadership to develop the engineered cellular medicines in clinical trials.

Why engineer TCRs? Immune cells rely on their receptors to identify targets, such as pathogenic bacteria and cancer cells. But immune cell receptors can be confused by molecules secreted within the tumor microenvironment, forcing them to halt their attack. They can also incorrectly attack an individual's own cells to trigger an autoimmune disease. A more recent concern stems from cellular medicines derived from a donor. Since the donor cells present different receptors compared to what the recipient's native T cells carry, the recipient's immune system (correctly) identifies the immunotherapy as a foreign substance, attacks it, and renders it less effective and less safe.

Therefore, it makes sense to engineer TCRs to create more potent and stealthier immunotherapies that are less likely to be tricked. Editas Medicine and Celgene still intend to do just that, albeit with subtle, yet important, differences to their development agreement.

Consideration

Previous Agreement (2015, 2018)

Amended Agreement (2019)

Focus

Cancer

Cancer and autoimmune diseases

Types of cells

CAR-T cells, alpha-beta T cells, gamma-delta T cells

Alpha-beta T cells

Juno Therapeutics exclusivity

Editas Medicine prohibited from all other work with CAR-T and TCRs in oncology

Editas Medicine prohibited from all other work on alpha-beta T cells and T cells derived from pluripotent stem cells

Upfront payment

$57.7 million (includes milestones collected under agreement)

$70 million

Milestone potential

$920 million plus tiered royalties

$195 million plus tiered royalties

Data source: SEC filings.

Essentially, Editas Medicine and Celgene have scaled back their original agreement in cancer and expanded their work to include autoimmune diseases. The most important detail is that the amended agreement allows the gene-editing pioneer to pursue the development of gamma-delta T cells, which were previously under the exclusive control of Juno Therapeutics. What does that mean?

Image source: Getty Images.

Without getting too far into the weeds, there are two main types of TCRs: alpha-beta and gamma-delta. The name refers to the molecular structure of the receptor, but that's not the important part.

Gamma-delta T cells, which comprise only about 5% of the T cells in your body, are thought to be one of the missing links in our understanding of the immune system. They're a mysterious bunch, but there could be significant value residing in the knowledge gaps.

These unique immune cells are governed by their own unique set of rules (relative to their alpha-beta peers) and straddle the innate immune system (what we're programmed with at birth) and adaptive immune systems (what's programmed as we encounter new environments throughout life). Gamma-delta T cells could be tinkered with in gut microbiome applications, to treat cardiovascular diseases, and to neutralize antibiotic-resistant infections. But the nearest commercial target of the mysterious immune cells is likely to be treating solid tumor cancers.

They possess potent anti-tumor activity where current immunotherapies fail, such as attacking cancer cells that lack tumor-specific antigens to target or that have become immune to checkpoint inhibitors. In fact, there's a link between certain cancer outcomes and the activity of specific gamma-delta T cells.

Given that, why would Celgene amend the agreement to ditch the rare subset of immune cells? Well, in August 2019, Celgene inked with a start-up called Immatics to develop engineered TCRs. The start-up's platform is based on gamma-delta tech.

Don't feel too bad for Editas Medicine, though. SEC filings reveal that the gene-editing pioneer didn't receive any money from the original collaboration deal with Celgene in the first nine months of 2019. That suggests the work had stalled or that the amendment was being hammered out for some time. The gene-editing pioneer wrestled back control of the tech and took a $70 million upfront payment to boot. While the potential milestone payments in the amended agreement are significantly lower than the originally promised bounty, Editas Medicine can offset that by signing a lucrative collaboration deal with a new partner.

There should be plenty of interest. Fellow gamma-delta T cell developer Adicet Bio recently landed an $80 million series B round funded in part by Johnson & Johnson, Regeneron,Samsung Biologics(not the same company as the electronics powerhouse), and Novartis. There's also Immatics, GammaDelta Therapeutics, and a handful of other start-ups making noise in the space.

Some competitors are directly engineering gamma-delta cells, and others are developing molecules to trigger the immune cells into action. Editas Medicine believes it has the edge, as it has a relatively precise and efficient method for engineering immune cells: gene editing.

The amended collaboration deal between Editas Medicine and Celgene received relatively little attention from investors. Perhaps that was a good thing, as Wall Street likely would have overreacted to the reduced scope of development and milestones. But investors that take the time to understand the details might be intrigued by the new research avenue for the gene-editing stock.

Can Editas Medicine become a leading force in gamma-delta T cell development? Perhaps. While it isn't the only company wielding a gene-editing platform, and CRISPR gene editing isn't the only type of gene editing, the company is well-positioned to take advantage of the opportunity. Investors will have to wait to see how (or if) the development strategy evolves around the new tech.

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Celgene Gave This Tech Back to Editas Medicine, but It Could Prove Valuable - The Motley Fool