Cancer immunotherapy. If any biotech sector is overheated, it’s this one. Companies working on immuno-oncology programs are rushing to take advantage, with at least four IPOs since last June, including a record breaker from Juno Therapeutics (NASDAQ: [[ticker:JUNO]]) in December.
Even here, though, it’s hard to see a meltdown looming. One type of immuno-oncology called checkpoint inhibition has already passed several important tests. Big drug makers have cranked up big internal teams. Three products have been approved since 2011.
They’re not curing cancer, but they’re a big step forward from chemotherapy, both in safety and efficacy. One of the biggest complaints so far about the checkpoint inhibitors is that they haven’t made any progress in blood-borne cancers.
Another, less proven kind of immuno-oncology uses engineered T cells to fight cancer and for investors holds greater risks. These so-called CAR-T programs have generated fantastic results in early trials. But what happens when they reach larger populations? Phase 2 trials are happening now; will the safety problems that CAR-T proponents say are manageable remain that way? (One of Juno’s academic partners, Memorial Sloan Kettering Cancer Center, put a program hold for a few weeks last year after two people died; the center had to alter the participation criteria for people with heart problems and make other changes.)
Would something worse sap enthusiasm not just for immunotherapy but biotech more generally?
Sophisticated investors know the difference, but the conceptual firewall now has a more tangible presence. Independent investor Brad Loncar recently created a 25-company immuno-oncology stock index—six big pharmas and 19 smaller firms, such as Juno and Kite Pharma (NASDAQ: [[ticker:KITE]])—to track the sector’s fortunes.
“A main idea behind creating it is that biotech is not one homogenous thing,” Loncar tells Xconomy. “The reality is that different therapeutic areas are valued differently and trade on their own circumstances. If we had more indices like this that tracked unique sectors within biotech, perhaps it would easier to compare their performance and use that knowledge to make better calls about the sector as a whole.”
The Crossovers: One result of Loncar’s exercise is to emphasize the tension between the sophisticated specialists and the generalists who pile into a bull run and stoke the bubble fears. But there’s a different flavor to the momentum that has taken so many biotechs public the past couple years. One private firm after another has raised a final round that includes so-called “crossover” investors—hedge funds and other public funds looking for an ownership foothold and a pole position for the IPO. Just yesterday Cambridge, MA-based Voyager Therapeutics, a gene therapy developer, announced one.
On the other coast, Aduro BioTech of Berkeley, CA, is poised to go public this week after its $51 million Series D round attracted several crossovers.
The list goes on. Dicerna Pharmaceuticals, Sage Therapeutics, Juno, Ultragenyx Pharmaceutical, and Calithera Biosciences are among many that attracted crossovers as prelude to an IPO; among those still private but with notable crossover backing
