Juno Therapeutics (NASDAQ: [[ticker:JUNO]]) and Novartis (NYSE: [[ticker:NVS]]) are cancer immunotherapy rivals, but Juno now has a rooting interest in Novartis’s success.
The two companies said today they have avoided a trial and settled a patent dispute around a specific bit of genetic engineering shared by some of their products that use what’s known as chimeric antigen receptor T cell (CAR-T) technology. With the settlement, Novartis will pay Seattle-based Juno $12.25 million immediately and add more payments down the road, including royalties if the Swiss drug maker’s lead CAR-T product comes to market.
“It gives us a bit more of a diversified revenue stream,” said Juno chief financial officer Steve Harr. “We wish Novartis luck and we’ll share their benefit, but we’ll be focused on our drugs.”
Both companies are working to develop cancer treatments based on a patient’s own immune cells, what’s known as chimeric antigen receptor T-cell (CAR-T) immunotherapy. When researchers extract a patient’s T cells and engineer them to be better cancer fighters, they give the cells an extra boost, called a costimulatory signaling domain, which helps them break past a cancer cell’s defenses. One kind of costimulatory domain, known as 4-1BB, was at the heart of the settled dispute, according to Harr.
Some of Juno’s CAR-T programs use 4-1BB, and Novartis’s lead program, CTL019, uses it as well. (The “19” refers to the cancer protein, CD19, that the T cells recognize and attack.) The 4-1BB domain isn’t the only way to soup up a T cell, and Juno is experimenting with others; but Harr noted that 4-1BB seems to help T cells with “persistence,” that is, to stay in the body and fight cancer longer.
Novartis spokesman Eric Althoff sent Xconomy a statement that read, in part, “Under the litigation settlement, all of the parties[‘] claims are dismissed, and Novartis is licensed to continue research, development and commercialization of CTL019 and subsequent CART-19 therapy programs that may be within the scope of the patent that was the subject of the litigation…. With the litigation behind us, we can focus on bringing this important therapy to patients.”
The patent fight was in fact a proxy battle. It began as a dispute between St. Jude’s Children’s Research Hospital in Memphis, TN, and the University of Pennsylvania. A researcher at St. Jude patented the 4-1BB technology and shared it with Penn researchers, with conditions. That arrangement, however, led to back-and-forth charges, and in late 2013, Juno jumped in to take the reins from St. Jude, as well as a license to its patent for $25 million upfront. As Juno was preparing to launch in late 2013 with work drawn from three academic centers, it became clear that to use 4-1BB with CAR-T that attacked CD-19 cancers, “the St. Jude patent was imperative,” said Harr.
Novartis, which by then was Penn’s exclusive partner, soon took up Penn’s side of the battle.
When Juno’s involvement in the case was first disclosed, the plan was to share 30 percent of litigation-related proceeds with St. Jude. Harr declined to say whether that arrangement holds true today. Whatever the split, if Novartis brings CTL019 to market, those proceeds could be substantial. In addition to the upfront and undisclosed milestone payments, Novartis will pay Juno mid-single digit royalties from U.S. net sales of products related to the case, and a low double digit percentage of the royalties that Novartis pays to Penn.
The upfront payment of $12.25 million alone seems to have compensated Juno for its efforts. In recent regulatory filings, the company said it spent about $10 million on the case through the end of 2014.
Juno raised hundreds of millions of dollars privately, and then saw its December 2014 IPO break biotech records, but every dollar still helps. The company is likely two or three years, minimum, from generating its own revenues (if its products indeed gain approval), and it has big spending plans this year. It is looking to move into new Seattle headquarters, and it plans to expand from its current six clinical products to 10—with some in multiple trials—by the end of March 2016.
