Celyad — Update 13 December 2016

The poster presented at ASH covers 12 patients. The Phase I study was a dose escalation safety study in which cohorts of three patients were treated sequentially before proceeding to a higher dose, the lowest dose tested was 1m cells rising to 30m cells in the fourth cohort. Both AML and MM patients were enrolled with at least one per cohort.

All patients had advanced cancers. In AML, patients were not in remission and had no reasonable standard treatment options available to them. In MM, patients had to have relapsed or have refractory multiple myeloma with progressive disease. The investigators reported that no objective clinical responses were seen, but cases of unexpected survival and improvements in hematological parameters were noted in both AML and MM patients. This is highly encouraging. Overall survival was 4.8 months. Exhibit 1 shows that seven of the 12 patients have died (as of early December 2016); many entered other trials.

It should be noted that these unadjusted cell dose levels were very low compared to the doses used in CD19 CAR T-cell therapy trials run by other companies. Celyad also did not adjust for patient body weight. For example, Kite Pharmaceuticals in its adult B-cell lymphoma study (Zuma-3) is dosing patients after a chemotherapy conditioning regimen with 2 x 106 cell/kg. This equates to 16 x 107 cell for an 80kg adult human compared to 3 x 107 NKR-2 cells. It should also be noted that many CD19 CAR T-cell trials give two doses of cells to minimize the side effects.

However, the use by Kite of a conditioning regimen allows room for the CD19 CAR T-cells to grow and divide, so the effective dose is probably 100 fold (or more) higher than the administered dose. NKR-2 therapy is different because the cells do not expand. This has now been confirmed in the clinical study when it was shown that the autologous NKR-2 CAR T-cells were not detectable after two weeks in 11 out of 12 patients.

In the interim data from the ongoing Bluebird Phase I MM study, some responses were seen at fixed doses of 5x107 cells with two stringent complete responses seen at fixed doses of 1.5x108 and three partial responses (to date) at 4.5x108 cells. These patients received preconditioning so the larger doses may have been 100-fold higher at 1010 or more. The CAR target used here was an anti-B cell antigen. Up to 50 patients may be enrolled eventually.

The investigators identified four patients as being of note in the Celyad study.

The main concerns in CAR therapy are cytokine release syndrome and neurotoxicity (possibly from the preconditioning regimen used).These were not seen in the Celyad study. There was an interesting side effect possibly associated with generation of an immune response: two of the three patients in cohort 4 (including Patient 13) developed a grade 1 (low level) maculopapular rash. This is a raised, flat area of red, inflamed skin. It can be caused by variety of viral infections and other conditions, including graft-versus-host disease as a result of bone marrow transplant. This was a transitory effect in Patient 13 and not fully clinically assessed. If this is confirmed at higher doses, it might be a good early marker of efficacy.

All other side effects were considered to be due to the cancer rather than to NKR-2 cells. The side effect profile will become clearer during the upcoming THINK trials, which will be testing higher and repeat doses.

In an interesting experiment, cells from two patients were tested in a cytokine assay for interferon gamma. Interferon gamma is produced by T cells in response to activation. The experiment shows high specificity of response. Exhibit 3 is a powerful demonstration of the specificity of the NKR-2 cell product based on results of cell testing from Patient 1, who had AML. Other tests showed a memory effect being generated in patients. Long-term immunity at higher doses has been shown in animal studies.

NKR-2 CAR T-cells from Patient 1 were cultured with a negative control (P815 cells), with multiple myeloma cells from different patients and with AML cells from a different patient. Finally, the cells were cultured with peripheral bone marrow cells (so containing cancer cells) from Patient 1. In each case an antibody that blocked the NKG2D ligand, the target of NKR-2 cells, was added. If the NKG2D ligands are blocked, the CAR T-cells should not recognize them and so would not be activated and not produce interferon gamma. If the NKR-2 cells responded to any normal immune cells, then interferon gamma would be produced, which would show that the NKR-2 cells were not specific. The experiment shows high specificity in this case.

Exhibit 3 also shows that the NKR-2 cells from Patient 1 (with AML) did not respond to normal cells and responded to a limited extent to non-self-cancer cells from other patients; the NKR-2 cells responded to both MM and AML cells from other patients, showing the ubiquity of the NKG2D ligand family. The NKR-2 cells responded very strongly to autologous cells. By using the blocking antibody, it was shown that the NKR-2 cells only attacked “stressed” cancer cells that displayed NKG2D ligands. This is a powerful demonstration of the specificity of the NKR-2 cell product.

Exhibit 3 also shows that the NKR-2 cells from Patient 1 (with AML) did not respond to normal cells and responded to a limited extent to non-self-cancer cells from other patients; the NKR-2 cells responded to both MM and AML cells from other patients, showing the ubiquity of the NKG2D ligand family. The NKR-2 cells responded very strongly to autologous cells. By using the blocking antibody, it was shown that the NKR-2 cells only attacked “stressed” cancer cells that displayed NKG2D ligands.

The company has indicated that tests on all the patient samples will be run so that full data can be published, probably in or after H217.

Although the trial was not designed to assess efficacy, and it was not expected that any benefits would be observed given the low dosing, there were cases of unexpected survival and improvement in hematological parameters. Investigators concluded that single doses of the NKR-2 cells were feasible and well tolerated to at least 30m cells. There were no objective clinical responses but there were cases of unexpected survival and improvement in hematological parameters. Safety was high with no CRS or neurotoxicity. Patient 13 has been the unexpected survivor as he has not enrolled in any other studies and has so far maintained stable disease with no therapy as against medical expectations (management statement) of rapid and fatal disease progression; the other two patients in Cohort 4 have died. The Phase I endpoint was at 28 days, as patients had short life expectancies. Four other patients at much lower doses have also survived to date but all also enrolled in other studies. In two patients with laboratory test data available, it was shown that the response was much stronger against autologous tumor cells displaying NKG2D ligands.

The next Phase Ib study, THINK (THerapeutic Immunotherapy with NKR-2), has been designed by Celyad as an open-label, multiple-dose US and European study. It will assess higher dose levels, safety and clinical activity of autologous NKR-2 cells in seven refractory cancers: the two hematological cancers with Phase I data (AML and MM) and five solid tumors (colorectal, ovarian, bladder, triple-negative breast, and pancreatic cancers).

In the THINK Phase Ib, Celyad intends to increase the dose starting at 3 x 108 an order of magnitude higher than the final Phase I dose, then 1 x 109 then 3 x 109. If patients have a weight of under 60kg, these doses will be adjusted but will otherwise be standardized. At each dose, the patients will receive three successive administrations, two weeks apart, of NKR-2 T-cells. There will be 24 patients, eight per dose group. They can be from any of the above cancer types. Results from this stage of the trial are expected by Celyad in Q317.

In the expansion phase, to test efficacy Celyad intends to enroll up to 86 more patients to evaluate each tumor type independently. Combined with patients in the dose-escalation phase that have the same tumor type, this should give at least 14 patients per cancer. According to management, this stage should start in H217.

Celyad expects the six-month interim follow-up data from the cohort expansion phase in H218. The formal one-year endpoint data will therefore be available in H119 with two-year data in 2020, depending on patient survival.

It is too early to develop detailed predictive models for solid tumor NKR-2 sales. Exhibit 4 looks at the number of US deaths (SEER database) in each for the two hematological cancers and the five solid cancer types. The cancer incidence is also given. Our value assumes $150,000 per treatment. This may be perceived as very low in the putative acute lymphoblastic leukemia (ALL) market, where $500,000 is currently seen as affordable. However, if and when a therapy treats many cancer types, the overall cost to the healthcare system becomes crucial. Exhibit 4 values are also based on deaths as a proxy for refractory late-stage cancers. Earlier-stage cancers could be treated as well, which would magnify the market potential in some cases.

In context the CD19 favorite, ALL, has about 1,500 deaths per year in the US. All are tragic and mostly children, so this is a worthwhile indication but a small market.

The probabilities used reflect a best estimate at this point but have no substantive evidence base. Ovarian scores highest as there is published preclinical work. Pancreatic cancer is notoriously hard to treat, so a high market share could be expected if NKR-2 had an impact on survival, but a very low probability is assigned. The global market opportunity is based on 75% of the potential US sales as the this is the main market for high-value biological therapies.

The valuation was revised in our last note (Unexpected clinical benefit published 28 November 2016). It is summarized in Exhibit 5.

The indicative value on the revised interim basis is $50 per share. No further dilution is expected until 2019; possibly later depending on any deals in the interim.

The solid tumor market will be further assessed as more clinical data is obtained. Although other companies are reporting successes with B-cell CAR approaches (Kite has stated a rolling BLA application to the FDA and Novartis will file in early 2017), solid tumor types remain a difficult area that has not yet been explored. Celyad may have a significant lead in this much larger market.