Sana Biotechnology: Finally Rewarding Investors, But Not Sufficiently Derisked (SANA)

Funding Overview – Sana’s Want To Be A Pioneer In Allogeneic Cell Remedy

Sana Biotechnology, Inc. (NASDAQ:SANA) completed one of many largest biotech IPO’s of all time again in February 2021, elevating near $600m by way of the issuance of ~23.5m shares priced at $25 per share. Previous to that, the corporate raised ~$700m from a “who’s who” of biotech VC’s, together with Arch Enterprise Companions, Baillie Gifford, Bezos Expeditions, and Flagship Pioneering.

On the time of its IPO, Sana had no scientific stage property, however in 2024 the corporate will oversee 4 scientific packages, treating seven completely different ailments, and involving three completely different therapies. Every remedy is a product of Sana’s “hypoimmune” expertise platform, which the corporate presents as an answer to the issues that forestall “autologous” cell therapies treating a wider pool of sufferers. Take into account this assertion from the corporate’s Q3 2023 quarterly report / 10Q submission:

Continuously in illness, cells are broken or lacking completely, and an efficient remedy wants to switch all the cell, an strategy known as cell remedy or ex vivo cell engineering.

A profitable therapeutic requires a capability to fabricate cells at scale that engraft, perform, and have the mandatory persistence within the physique. Of those necessities, long-term persistence associated to overcoming immunologic rejection of one other particular person’s cells has been essentially the most difficult, which has led many to deal with autologous, or a affected person’s personal, cells because the therapeutic supply.

Nonetheless, autologous therapies require a posh technique of harvesting cells from the sufferers, manipulating them outdoors the physique, and returning them to the affected person. Merchandise utilizing this strategy have needed to handle vital challenges similar to scalability, product variability, product high quality, price, affected person accessibility, and limits on variety of cell varieties which can be amenable to this strategy

That is undoubtedly true – a number of autologous cell therapies have been permitted – Gilead Sciences’ (GILD) Yescarta and Tecartus earned >$1bn of revenues between them in 2022, whereas Bristol-Myers Squibb’s (BMY) Abecma and Breyanzi earned >$500m, and Legend Biotech (LEGN) / Johnson & Johnson’s (JNJ) Carvykti earned $152m in Q3 2023 alone.

All of those therapies are permitted to deal with varieties of hematological most cancers and though they’re performing fairly effectively out there place, the market continues to harbor doubts in regards to the long-term security and sturdiness profile of all these remedy, their price effectiveness, the chance / reward profile, and their scalability, given the robust therapy regime and reliance on utilizing a affected person’s personal cells, and lack of long-term knowledge.

Sana’s answer to this downside is mentioned as follows in its newest 10Q submission:

Quite than utilizing autologous cells to beat immune rejection, we have now invested in creating hypoimmune-modified cells that may “conceal” from the affected person’s immune system.

We’re striving to make therapies that use pluripotent stem cells with our hypoimmune genetic modifications because the beginning materials, which we then differentiate into a selected cell kind, similar to a pancreatic islet cell, earlier than treating the affected person.

Moreover, there are cell varieties for which efficient differentiation protocols from a stem cell haven’t but been developed, similar to T cells. For these cell varieties, as an alternative of ranging from a pluripotent stem cell, we are able to use allogeneic, fully-differentiated cells sourced from a donor because the beginning materials to which we then apply our hypoimmune genetic modifications.

There are various benefits to the usage of non-autologous cells – cell situation, availability, velocity, comfort, and value for instance, but additionally a significant disadvantage – how to make sure a affected person’s immune system doesn’t reject the brand new cells, resulting in potential lethal issues for the sufferers, similar to graft versus host illness (“GvHD”), cytokine launch syndrome (“CRS”), or neurotoxicity (“NTX”)?

Sana’s Inventory Hovering After Torrid Few Years

Whereas Sana’s ambition could also be a noble one, and one which has attracted loads of funding – permitting the corporate to report web losses of $(285m), $(356m), $(270m) within the years 2020, 2021, and 2022, and $(195m) throughout the primary 9 months of 2023, with $205m invested in R&D – a scarcity of tangible progress has seen the Seattle-based biotech’s share value fall <$3, most not too long ago in November final yr – a lack of almost 90%.

However, Sana inventory has been hovering over the previous couple of days, reaching a excessive of >$7 by shut of enterprise yesterday, though the present traded value is nearer to $6 per share, giving the corporate a market cap valuation of ~$1.25bn.

Initially, the corporate was in a position to announce on January fifth that the Meals and Drug Company (“FDA”) had cleared its new drug software for candidate SC262 to provoke a scientific research within the therapy of relapsed or refractory B-cell malignancies, initially in sufferers who’ve obtained prior CD19-directed CAR T remedy. In a press release the corporate discusses SC262 as follows:

Engineered CAR T cell therapies for B-cell malignancies use binders to focus on proteins expressed on the floor of B cells. One such protein, CD19, has been the goal of all permitted autologous CAR T therapies for B-cell lymphoma and B-cell acute lymphoblastic leukemia up to now. Sadly, incomplete responses or relapses happen in roughly 60% of CD19 CAR T-treated sufferers.

CD22, which can be a B-cell floor protein, has emerged as an alternative choice to deal with failure to realize sturdy full responses with CD19-directed CAR T remedy. SC262 expresses the identical CAR, together with the identical CD22 binder, utilized in CD22-directed CAR T therapies examined in a number of educational scientific trials. So far, these trials have proven sturdy full responses in a considerable variety of sufferers within the relapse setting following therapy with a CD19-directed CAR T remedy.

Sana’s lead drug, SC291, is in reality directed in opposition to CD19, and it’s at the moment the topic of two completely different Section 1 scientific research, the primary, ARDENT, involving the indications of Non-Hodgkin’s Lymphoma (“NHL”), and Persistent Lymphocytic Leukemia (“CLL”), and the second, GLEAM, the autoimmune circumstances lupus nephritis, extrarenal systemic lupus erythematosus (“SLE”), and AAV.

The truth that Sana is autoimmune circumstances in addition to oncological ones will seemingly have happy the market, because the affected person populations are typically bigger than in oncology. For instance, Sana speculates that the Lupus market extends to >230k sufferers, and SLE to >200k sufferers. The Section 1 GLEAM research has solely not too long ago been initiated, however Sana has promised knowledge from the research in 2024 – giving traders hope that optimistic outcomes will enhance the market’s valuation of the corporate.

Again to Sana’s latest scientific candidate, SC262. The corporate’s first research can be in b-cell malignancies, in sufferers who’ve failed a previous CD19 remedy, which can signify a affected person inhabitants of ~12k by 2027, administration estimates. The correlation between CD22 and its efficacy in treating CD19 failures has already been established in prior research, narrowing the event dangers marginally.

One other main cause for the run up in Sana inventory this week is a response to a presentation given by administration this week, at this yr’s JPMorgan (JPM) Healthcare Convention – a flagship occasion within the biotech and Pharma calendar – in regards to the potential of its new candidate to focus on not solely autoimmune circumstances, but additionally, probably, Kind 1 diabetes.

Sana Touts Potential Of New Drug Candidate In Diabetes

Sana estimates that Kind 1 diabetes is an ~8m affected person market, and though there are a selection of accessible therapies for the situation, none supply the kind of everlasting treatment that Sana believes it could actually develop over time on this subject, as proven under, in a slide from Sana’s newest investor presentation.

Sana has been in a position to present the “survival and performance of allogeneic hypoimmune pancreatic islet cells in a diabetic non-human primate for six months, with out immunosuppression,” in a preclinical research.

Clearly, this represents solely the start of an extended improvement journey which can now transfer into the clinic, however the tantalizing prospect of a “one and performed” everlasting treatment for diabetes clearly has the market excited.

Sana Biotechnology – The Purchase, Promote and Maintain Circumstances Thought-about

Sana is a biotech that went public by way of a mega-money IPO, and one which has made some daring guarantees about what it might be able to obtain within the subject of cell remedy with an answer that’s allogeneic, not autologous. The principle problem right here is overcoming the immunosuppression downside, i.e., ensuring that the cells which can be custom-engineered for sufferers utilizing Sana’s hypoimmune expertise aren’t rejected by the affected person’s immune system.

Creating an approvable and marketable allogeneic cell remedy is an issue that no different firm has come near fixing but, though a lot are attempting, together with Adicet Bio (ACET), Adaptimmune (ADAP), Allogene (ALLO), AlloVir (ALVR), Atara Biotherapeutics (ATRA), BioCardia (BCDA), Beam Therapeutics (BEAM), Caribou Biosciences (CRBU), CRISPR Therapeutics (CRSP), Destiny Therapeutics (FATE), Gracell Biotechnologies (GRCL), Nkarta (NKTX), Poseida Therapeutics (PSTX), and different in addition to.

Extremely, all of those corporations’ share costs are down >65% over a 5-year interval (or since itemizing), which speaks to the fears the market clearly has round whether or not the strategy can succeed, or whether or not artificially introducing engineered international cells right into a sufferers’ physique is an strategy that’s destined to fail.

With solely 2 candidates in scientific research – the primary in a Section 1 research in NHL and CLL, and a Section 1, which has solely simply begun, in autoimmune, and the second that can goal NHL (CD19 failures), in some ways it’s laborious to justify Sana’s current valuation in extra of $1.3bn, though conversely, shortly after its IPO Sana was value <4x as a lot, purely as a result of at the moment, traders and the market have been assured the corporate had successful expertise.

That has not confirmed the case, and Sana has needed to pull out a few of its packages, similar to its in-vivo CAR T remedy, abandoned last year as the corporate sought to make employees cuts with the intention to management bills higher. The in-vivo program would have been liable for a considerable chunk of the corporate’s post-IPO valuation.

On the plus aspect, this yr Sana is promising knowledge readouts from each SC291 and SC262 in oncology, and from SC291 in autoimmune. If any of those units are optimistic, it could give the share value contemporary upside impetus. Additional down the road, Sana will hope to maneuver its Kind 1 diabetes candidate into scientific research, and if it does that within the subsequent 12 months, there may be one other probably value-enhancing catalyst occurring in 2024 for investor to sit up for.

I feel the important thing issue dictating whether or not Sana expertise is a “purchase,” “promote,” or “maintain” after current occasions, and at present value, stays the expertise itself, and whether or not knowledge due this yr will present any strong “proof of idea.”

Administration has been banging the drum for its hypoimmune expertise, and opening it as much as complete new fields of analysis – and markets – within the type of autoimmune illness and Kind 1 diabetes, though a cynic may counsel that its consideration is being drawn to different markets resulting from a scarcity of progress in oncology.

In equity, within the ARDENT research, SC291 generated a partial response in 3 of 4 evaluable sufferers, with 2 ongoing full responses, which is encouraging, though as ever with cell therapies, it’s the long term knowledge that gives essentially the most validation, plus the security profile. There may be apparently no prospect of Sana securing an approval in any indication for 2-3 years, no less than.

Though Sana has not but run into any main issues of safety, the fragile nature of cell remedy and danger to sufferers means scientific holds imposed by the FDA on research within the U.S., and by authorities abroad, are widespread and might delay improvement by years.

To summarize my tackle Sana, it appears clear that the corporate means enterprise in 2024. Administration will concentrate on the heavy spending on R&D throughout the previous few years, and likewise of its dwindling money reserves, which stood at $269m as of Q3, suggesting the funding runway may very well be exhausted in 2025 at present price of burn.

As such, Sana Biotechnology, Inc. can be beneath stress this yr to ship some indicators of tangible progress in the direction of the purpose of delivering a business, allogeneic cell remedy – maybe the world’s first. Administration has begun the yr by suggesting its pre-clinical knowledge exhibits it might be able to efficiently deal with diabetes, and by speaking up its transfer into autoimmune. These are worthy accomplishments, however now the corporate must ship the scientific knowledge to help its claims, and that begins with oncology.

Final yr, I gave “purchase” suggestions to a number of cell remedy corporations I believed have been on the verge of a big breakthrough, some within the allogeneic area, some testing autoimmune therapies, however in the end these corporations share costs carried out poorly resulting from a scarcity of conclusive knowledge and genuinely compelling progress.

Do I really feel in a different way about Sana Biotechnology in 2024? Personally, I imagine Sana has not but collected a adequate quantity of scientific knowledge for a full judgement to be made, which is why I’ll give the corporate a “maintain” suggestion. I truly imagine that like 2023, 2024 will not be cell remedy’s yr. I’m definitely not giving up hope it could actually ultimately succeed, however I’m not assured it’ll present traders with a lot in the way in which of breakthrough progress this yr – maybe 2025 is a extra reasonable goal.

Sana has particular potential, however the upsurge on a possible path to diabetes therapy could also be overblown, and progress within the “bread and butter” oncology indications could also be the very best indicator of what Sana is, or is not able to as an organization going ahead this present day.

If I have been an investor I might be ready to carry my Sana Biotechnology, Inc. shares and await extra knowledge. Nonetheless, on the present value, I’d not wish to make a purchase so early within the scientific research journey, and I’d regard this as maybe one the upper share value peaks we’re more likely to see in 2024.