Placing Investment Bets on Biomedical Breakthroughs in the 21st Century Requires Patience

October 31, 2018 – For the public, investing in biomedical research-based companies that are on the leading and bleeding edge of the science can be difficult. Why? Because investors don’t work to the same timelines as researchers. Research on a new medical breakthrough can take years. Research can lead to dead ends, clinical trials that don’t produce expected results. But investors seek quicker returns based on quarterly and annual results. So when the public buys into a medical research firm, to a biopharmaceutical company working on a new drug therapy, it makes for an interesting market dynamic which brings me to the conversation I had today with lawyer, David Bakst, a partner at Mayer Brown, located in New York City. Bakst legal practice deals with security offerings from small private investment to multi-billion dollar IPOs.

Recently he has worked with two biopharmaceutical companies helping them to navigate both investment and the regulatory environment.

GW Pharmaceutical plc

GW Pharmaceutical is a United Kingdom-based medical research company focused on cannabinoid research. Cannabinoids are derived from marijuana (cannabis). They look at the chemical properties of the plant that are not psychotropic in search of therapies to combat epilepsy, glioma, and schizophrenia to name a few. The non-psychotropic factors in marijuana are proving to have an enormous upside for dealing with such intractable diseases.

The company recently received U.S. Food and Drug Administration (FDA) approval and Drug Enforcement Agency (DEA) rescheduling for Epidiolex, an oral solution aimed at two rare epileptic syndromes, Lennox-Gastaut and Dravet. These forms of epilepsy affect children and amount to between 1 and 4% of the total population suffering from the disease. How Epidiolex works is to modulate cellular pathways in the nervous system to inhibit convulsions. The mechanism of the modulation is still not fully understood but points to potential other application to diseases that impact the brain and nervous system both in the neurons themselves as well as in synaptic paths.

Where does Mayer Brown fit in with GW’s efforts? The law firm’s latest effort provided representation for a $345 million (USD) public offering which was listed on NASDAQ. To date, GW with the assistant of Bakst’s law firm, has raised over $1 billion to commercialize its cannabinoid research.

Adaptimmune Therapeutics plc

This biopharmaceutical company is also out of the United Kingdom where initial research was done at Oxford University. Today it’s North American research arm is in Philadelphia. The company’s focus has been on engineering T-cells to arm the body’s immune system to attack cancerous tumors.

Harnessing the body’s immune system to fight cancer is not a new idea. But what Adaptimmune is doing has the potential to destroy solid tumors found in many parts of the body. Adaptimmune is re-engineering include Mage-A10 and A4 Spear T-cells within a patient’s own immune system to bind to a cancer cell’s peptides and thus find a path into the cell to disrupt and kill it. At the same time, the enhanced T-cells leave healthy tissue alone.

To create the enhanced T-cells, blood cells are taken from a cancer patient using a process called leukapheresis which separates white blood cells from red cells, platelets, and plasma. The next part of the process separates the targeted T-cells from the other white blood cells. Those T-cells then receive enhanced genes containing Adaptimmune’s encoded anti-cancer instructions. The cells are subsequently cultivated to increase their population to a volume sufficient for treatment. The finished product is then concentrated and frozen until the patient can be treated.

Adaptimmune is part of the growing field of personalized medicine where genetic enhancements to an individual’s cells provide a custom treatment. Every finished product a patient receives is unique to him or her.

Needless to say, research of this type doesn’t happen quickly. From 1993 to 1999 the technology was developed at Oxford University and in 1999 a predecessor to Adaptimmune was formed to commercialize the T cell receptor technology.  In 2008 after an acquisition by Medigene, Adaptimmune spun out as a virtual company with the collaboration of the University of Pennsylvania.  In 2014 it struck a significant research and development collaboration with GSK and raised a $104 million of new equity in one of the largest private rounds ever seen in the biopharmaceutical sector. In 2015 Adaptimmune IPO on NASDAQ raised $176 million.

I would imagine there are not many investors in today’s stock markets with the patience to stick around for the complex evolution of the company’s path to getting its products right. That’s where Mayer Brown comes in with its expertise in providing guidance as to how to document and disclose properly, the company’s products including the risk involved to position the company to access first private and then public capital markets and the listing on NASDAQ. Mayer Brown has worked with Adaptimmune on private funding, the IPO and multiple follow-on offerings raising approximately a half-billion dollars.

I thank David Bakst for his time today and as always, welcome your comments and questions.