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CRISPR and Axovant: What the Market Thinks

Let’s go to the NASDAQ for some insight on a couple of recent biopharma stories. First off is Axovant, a company that’s interesting in a number of distressing ways. I last wrote about them here, after their Alzheimer’s candidate came up short in the clinic, which was a development that surprised no one who had been paying attention. The same compound has now failed in a trial for Lewy body dementia, surprising no one who has been paying attention. I have been unhappy about Axovant since their IPO; the entire operation seems to someone from the outside (like me) as engineered to sell unwonted hope to both investors and patients. The particular financial conditions of the company (extraordinarily rapid IPO, generous provisions to insiders, strong happy feel-good coverage from the investment firms that got commissions from the IPO itself and from nobody else, etc.) should have been enough to give anyone pause. Knowing that both the compound itself and its mechanism of action had failed multiple times in the clinic was just more reason to wonder what was going on, and now here we are.

I only wish I’d been short the stock this time as well, and Axovant’s remaining investors no doubt wish that they weren’t still long. When the Alzheimer’s news hit back last fall, the stock price went from about 24 to about 6, but even when a stock is down in the single digits you can still lose a lot. Premarket, AXON has dropped from Friday’s 5.4 to about 2.7, and half your money is half your money no matter where you started. As far as I can tell, Axovant’s main hope is another castoff compound, nelotanserin (ex-Arena), but that one’s not too encouraging, either. And what does this mean for CEO Vivek Ramaswamy’s stable of other companies with similar strategies? One of these could still work out, of course, but this doesn’t make the whole idea look any more appealing.

Now to another story. I mentioned last May that a paper had come out with doubts about the utility of CRISPR gene editing. That caused the stocks of the companies in this field to drop, but the work had enough questions around it that I took that as a buying opportunity, and bought Editas (EDIT) at 13.46 and Crispr Therapeutics (CRSP) at 14.08. That has been a profitable investment, since they closed Friday at 33.59 and 26.81 respectively, but now another paper has come out that’s going to affect the whole field.

This one shows that many people may already have an immune response to Cas9 proteins, because we’ve been exposed to the relevant bacterial sources (Staphylococcus and Streptococcus) so much. That could well complicate many of the more ambitious ideas about using CRISPR techniques on human patients, although you have to figure that ex vivo modifications (via bone marrow transplants, etc.) would be in much better shape. Introducing the whole Cas9 machinery into humans in some form, though, could run into trouble. I’m not sure – no one’s sure – about how this will affect newer CRISPR-based ideas, many of which involve modifications of the system and proteins from different sources. But it’s “classic CRISPR” that’s closest to the clinic.

News of the paper circulated around on Friday, but it appears that many investors needed the weekend to read the paper – or to read stories about the paper, more likely. The stocks involved (chiefly EDIT, CRSP, and NTLA) didn’t move much, but premarket today they’re all down about 10%. I’m considering whether to sell myself (taking my profits and running) or waiting this out a bit, and I haven’t decided yet. But it’s for sure that the development of CRISPR-based therapies has not thrown out its last surprise, and anyone investing in this area had better be prepared for turbulence.

33 comments on “CRISPR and Axovant: What the Market Thinks”

  1. Biotech Scientist says:

    Aren’t all of these gene editing delivery mechanisms packaged in AAV? I am not really sure how circulating Ab’s would effect CAS9 getting expressed inside a cell? Please correct me if this is incorrect.

  2. Stephen says:

    Once Cas9 is expressed in the target cell, the cell will eventually break down Cas9 and present some of its peptide fragment on MHC Class 1 proteins. Circulating T cells will recognize these peptide fragments as “foreign” and will destroy the target cell. In practice, that means that your immune system might end up killing all your CRISPR’d cells.

    1. Cameron Beaudreault says:

      Stephen,

      your analysis is accurate, but there are methods by which you could dampen this response (admittedly, they’d be expensive). Using something like Basilixumab to prevent IL-2 signaling could be useful. Or you could block T-cell activation entirely via Betalacept. You could also potentially culture T-regs specific to your desired cell population. The small molecules and mAbs used in modern organ transplantation protocols would go a long way towards promoting immune tolerance in this situation.

  3. EC says:

    Yes, so far the most advanced method for delivery of Cas9 to cells is by AAV transduction. But this doesn’t prevent MHCI from presenting Cas9 peptides on the cell surface. Additionally, the transduced cell may die and release Cas9 to the outside.

  4. Biotech Scientist says:

    Need a like or favorite button. Thank you.

  5. John says:

    With you on the EDIT – when I saw the stock drop this morning, I discovered the paper and figured that was the reason why!
    I would not be surprised by the existence of less immunogenic Cas9 homologues, but they would no doubt require additional development. Good luck to them!

  6. anon says:

    “This is Wall Street, Dr. Burry. If you offer us free money, we ARE going to take it”

  7. Magrinho says:

    @anon: Indeed!

    I think that is what you will hear if you play Axovant’s prospectus backwards.

  8. arcya says:

    The concern for adaptive immune response in CRISPR patients has been real for a while – nearly every CRISPR group I know has been working on a non-immunogenic version of Cas9. Protein structure biologists have been suddenly in extremely high demand!

    Anyway everyone’s pushing on it but there have been almost no publications out of that effort, so I can only conclude that making non-immunogenic Cas9 that still works is harder than you’d think.

  9. Leo Mckenna says:

    Mmmmm; almost double your money on a stock and you are wondering whether to sell, sounds like greed to me! A profit is a profit…

    1. dearieme says:

      Supposedly it was a Rothschild who said you should aim to leave the last 10% to the next man.

  10. In Vivo Veritas says:

    Anyone have a feel for why EDIT and NTLA (down >10%) are getting it so much harder than CRSP (down ~2.5%)?

    1. Derek Lowe says:

      Wondering that myself, actually. . .

      1. Andy says:

        Take a look at outstanding shares and the float as a %. Edit has ~44MM shares outstanding w/ a float of 33.7MM (~76%). CRSP has ~41MM shares outstanding w/ a float of ~14.6MM (~36%). Insiders aren’t buying or selling on this kind of “news” and the number of shares available for regular trading is significantly less. This leads to a more stable share price. Just my 2 cents. Cheers All.

        1. Colin says:

          Low float could have something to do with it. Low float, or less stock outstanding, that are available to people other than insiders, management, institutional investors may limit the amount of ‘active trading’ in a stock, so it might be harder to exit from a position if you are long the stock where there are less shares being traded.
          I wonder if that’s “all” there is too it, or if something about the companies pipelines, differentiated platform etc i.e. something to do with the science, that might also factor in.

          Wall St rules or Cambridge/Oyster Point/Sorrento Vally rules…who knows

    2. Qi says:

      The majority of CRSP pipeline is ex-vivo as compared to EDIT and NTLA. Also, the publisher of the paper on immune issues of CRISPR is on the scientific board of CRSP.

  11. Anon says:

    This is the first post that Derek talks about his investments as far as I can remember. I may be wrong though.

    1. An Old Chemist says:

      Derek must have made a truck-load of money in the Vertex stock that his mind is flooded with investment ideas. During his employment there for 10 years, VRTX stock rose from 40 to 156.

  12. mp says:

    Re: problems with immunogenecity of cas9….

    In my opinion, the first clinical applications of cas9 will be the ex vivo genetic manipulation of bone marrow cells. This will be done by transient transfection with a gRNA-loaded cas9 ribonucleoprotein complex. Thus, there won’t be any sort of problems with immunogenicity, as the cas9 will no longer be expressed once the bone marrow is re-introduced into the patient.

  13. Barry says:

    First generation mAbs were murine proteins.As such, they were immunogenic, and efficacy went to zero in humans over time. It took a lot of protein engineering, but these were supercede by humanized or fully human mAbs.
    Efforts to engineer less immunogenic CAS9 and CRISPR are surely going on as we read this.But since there’s no mammalian homologue, that may prove even harder than for the mAbs.

  14. Crisprfreak says:

    Lets see if pfizer wants to start a CRISPR program? Anyone want to work there?

  15. Industry Guy says:

    Is it legal for the authors of this article to short the companies involved knowing they will take a hit when this gets published?

    1. Derek Lowe says:

      Not suggesting shorting any of the stocks in the post, though. And although I don’t exactly think I can move markets like that, I do try not to front-run my own positions, on the rare occasions that I’m long or short a company that I’m actually talking about on the blog. (Mind you, it’s a Wall St. tradition to do exactly that). I only have two other individual stock positions at the moment, neither of which involve companies that I’ve been posting about.

      1. Industry Guy says:

        I was asking whether the authors of the CRISPr autoimmunity paper are legally allowed to short stock in the companies, not you Derek 🙂

        1. Derek Lowe says:

          Hah! Now that’s an interesting question. They must have known that this would hammer the stocks – it’s information that’s material and nonpublic, but not involving a breach of trust from inside the company. And since this was a preprint, there’s not even a publisher involved. I’ll ask around; you have my curiosity up.

          1. Thoryke says:

            Isn’t this somewhat analogous to the ‘privileged knowledge’ that landed Martha Stewart in jail?

          2. Derek Lowe says:

            That’s what I’m wondering. In that case, the information traces back to a corporate insider (Waksal), and the tippee (Stewart) must have known that this was confidential information. In this case, though, the new information has no connection with the companies at all. The SEC defines insider trading, as I understand it, as “any securities transaction made when the person behind the trade is aware of nonpublic material information”, though, so that would seem to apply here. But these aren’t “insiders”? Time for a separate post on all this, I think.

  16. johnnyboy says:

    More on Axovant:
    https://endpts.com/axovant-that-positive-p-value-we-reported-yesterday-um-we-screwed-that-up-too/

    Turns out, Science is hard. Harder than milking $2 billion from silicon valley honchos, anyway.

  17. Anonanon says:

    How about the entire model of the company is to do with drugs what big pharma can’t because they’re supposedly terrible at it, so we will design a better study to prove the drug works…then Vivek hires his kid brother straight out of medical school with zero experience, gives him a salary over $200k and then makes him VP of medical?
    Yea, he also hired his mom too at over $200k/yr. Given paid himself over $500k base and about $3mil in stock.

    That company is like totally smart and stable.

    1. Anon says:

      This smacks of anti-Indian racism

      1. Derek Lowe says:

        Not to me. From what I know, that’s a pretty accurate description of what happened, and the only specifically “Indian” thing about it is the name “Vivek”. Would it be better if the comment just said “the Axovant CEO”?

  18. Alex says:

    This is a bit of a told-ya-so moment for us microbial ecologists 🙂 There’s basically zero functional reasons to use the Staph / Strep Cas9 proteins when there are thousands of interesting homologs from other environmental bacterial species out there – these just happened to be the two that the molecular biologists and biochemists knew about and decided to stick with. It’s completely crazy that there haven’t already been a score of studies just testing and comparing dozens of natural Cas9 enzymes (let alone all of the other cas proteins) for different efficiencies and functionality. The only one I have seen so far was: https://www.nature.com/articles/nature21059

    1. steve says:

      You’re assuming that all the work is reported in the academic literature. It would be astonishing if there aren’t lots of companies (and academics) whose work you’ll only see in the patent literature and only once it publishes there.

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