Improving Stem Cell Transplant Success Rates
When it comes to investing in biotech, we know there’s a ton of money to be made, but also a ton of money to be lost. For every Foundation Medicine story there’s a Bind Therapeutics story to accompany it. For exposure to the healthcare sector, we’re happy to hold solid dividend growth investing stocks like Johnson and Johnson or Medtronic which have not only paid but increased their dividends for 56 and 46 years respectively at a rate that has more than exceeded inflation. When your job involves writing insightful articles and offering them to your lovely readers for free, you need some cash coming in to feed your MBAs with.
Usually when there’s a biotech IPO it goes something like this. Company X has been trying to develop a drug that would provide improved treatment for patients who have Disease Y. They’ve raised venture capital funding for a while and now need a bigger chunk of change to take the drug from Phase X clinical trials to Phase Y clinical trials. That’s usually the value proposition on offer, so we’ll start by looking at who they are working with (better be some big pharma involvement), who backed them (hopefully notable VCs), and the size of the potential market (how prevalent is the disease or condition to start with). Any past success stories of company management or involvement of people like George Church is an added plus. As retail investors who have no qualifications whatsoever to be discussing medical topics, it’s about the best we can do.
Since there seems to be loads of biotech IPOs happening all the time, we usually just cherry pick certain companies where the underlying technology seems to be ahead of its time and the topic is interesting. It’s no fun writing about boring medical topics. That’s why when we saw Magenta Therapeutics file for an IPO, we thought that this interesting company merited a closer look.
Founded in 2016, Massachusetts startup Magenta Therapeutics has taken in just over $150 million in funding from a whole slew of investors including Google Ventures. In short, Magenta is setting out to improve the survival rates for stem cell transplants. Now before we do digging into what that means, we need to understand a bit more about stem cells.
About Stem Cells
The story starts and ends with something called “bone marrow”. If you’re not a vegetarian, you’ve probably seen bone marrow in the context of some animal you were chewing on. Some people even like to eat bone marrow on its own with a bit of toast and parsley salad. What you may not know about bone marrow is the function it serves aside from a culinary treat. Bone marrow is a squishy substance inside bones which contains cells called “hematopoietic stem cells” that can transform into more bone marrow cells or any other type of blood cell. A 200 pound human has about 8 pounds of bone marrow, and it’s as important as any other organ in your body to make sure everything functions normally, including your immune system. Macmillan Cancer Support explains this in the most succinct manner possible:
The bone marrow is where stem cells are made. Stem cells are blood cells at the earliest stage of development. All our blood cells develop from stem cells in the bone marrow. Stem cells stay inside the bone marrow and when they are fully developed they go into the bloodstream.
Blood marrow produces blood cells. Blood is pretty important stuff because if all of it leaks out you will die. When you get blood cancer, it causes a problem with the blood cells you are creating. It’s a more common condition than you might think:
Just over 10% of all cancers diagnosed in the USA in 2017 were blood cancers. In order to treat blood cancer, there’s a form of treatment that can be given called “stem cell transplants”.
Stem Cells Transplants vs. Bone Marrow Transplants
The first thing you might be thinking is how the hell can they transplant all those many pounds of squishy stuff located in the 206 bones in your body. In reality, the name is a bit misleading. Also called a stem cell transplant, a bone marrow transplant involves injecting healthy stem cells into your bone marrow which then go on to create healthy blood cells. Where these stem cells come from distinguishes the name. If the cells come from someone’s bone marrow (yours or a donor), then it’s a bone marrow transplant. If the cells come from somewhere else (usually blood), then it’s referred to just as a stem cell transplant. In either case, they inject those healthy stem cells into your bone marrow and you hang around the hospital a few weeks hoping there are no complications. Let’s talk about complications.
Stem Cell Transplant Success Rates
Dubbed “one of the greatest success stories in cancer treatment”, bone marrow transplants aren’t exactly as successful as that label might imply. The notable Sloan Kettering Memorial Center brags about a 75% success rate versus a predicted 62% success rate. Imagine hearing the doctor say “we think you should try this treatment where there is a 38% chance you may die but if you don’t, you’ll die anyway”. It’s not ideal.
Let’s distill the stem cell transplant process down to three simple steps courtesy of the National Cancer Center:
The first step is finding cells. There may be 25 million registered bone marrow donors worldwide, but only half of all patients are able to match with a donor. That means you need to find an alternative stem cell source. One such source is blood harvested from umbilical cords (also called cord blood). Of the 712,000 units that exist worldwide, just 4% have enough blood cells to be used. This is where Magenta Therapeutics steps in.
The most advanced product candidate at Magenta is MGTA-456 which “extends the use of cord blood transplant to more patients by increasing the number of stem cells in a single cord blood unit to yield a higher stem cell dose.” MGTA-456 has achieved human proof-of-concept in Phase I/II trials in a total of 36 patients with blood cancers. Data from the trials showed that all 36 patients treated with MGTA-456 were successfully transplanted and the median time to transplant recovery was accelerated. On April 11, 2018, they received orphan drug designation from the FDA for MGTA-456 for patients receiving bone marrow transplant. They added MGTA-456 to their portfolio in April 2017 when Novartis granted them sole worldwide rights. But that’s not all Magenta has up their white lab jacket sleeves.
Stem Cell Transplant Conditioning
“Conditioning” refers to the process that takes place after sufficient cells have been obtained. The patient is then “conditioned” for transplant using toxic chemotherapy and/or radiation. Nearly all transplant patients experience complications as a result of current conditioning treatments, and conditioning toxicity is responsible for up to 35% of mortality following allogeneic transplants (transplants where the stem cells come from a donor). Instead of using toxic chemo or radiation, Magenta proposes to use “antibody-drug conjugates”, or ADCs, for conditioning. These drugs specifically deplete only the cell types required to be eliminated in a non-toxic manner:
Again, it doesn’t just stop there. Once the patient is ready to receive the stem cells, more complications can take place. One of these is referred to as GvHD. This is when the donor T cells recognize the patient’s cells as foreign and attack the patient’s tissues and organs, particularly the skin, liver and gastrointestinal system. Approximately 50 to 80% of allogeneic transplant patients experience acute GvHD, and it accounts for approximately 10% of deaths following allogeneic transplants. Magenta is developing a treatment (MGTA-G100) that sorts this out before the patient receives the donor’s stem cells. It’s in very early stages of discovery, but goes to show how Magenta Therapeutics is addressing all aspects of stem cell transplants to improve success rates.
The company also has other products in their pipeline that will help improve stem cell transplant success rates and it’s important to note that it will take about a decade before the company will reach a level of maturity such that they’re offering 1.8 treatments per stem cell transplant patient. “By 2028, the approximately 120,000 bone marrow transplant patients could be treated by around 220,000 aggregate treatments per year” says Magenta. That’s assuming of course that they’re able to address the competitive threats that exist for each of their drug candidates. Other companies are developing technologies to improve the distinct steps of bone marrow transplant, some of which can be found on page 142 of Magenta’s massive S-1 filing which also contains a ridiculous amount of technical information that we have no chance whatsoever at being able to understand.
Investing in a vision that projects a decade into the future takes some faith, and the people who plan to guide the ship to the harbor are “a group of world leaders and pioneers in the fields of stem cell biology, biotherapeutics and transplant medicine” according to the company. As for buying shares in Magenta if the IPO happens, don’t try to time the market and buy your entire position on the first day of trading, but instead use dollar-cost-averaging. This involves buying a small chunk of your position over multiple periods of time (predetermined of course) to help smooth out price volatility.
Given the prevalence of blood cancer, it’s likely someone you know will be affected by it at some point in your lifetime – maybe even you. That means some of you might have personal reasons to invest in companies like Magenta Therapeutics. With over 1 million charities in the U.S. at the moment, it’s becoming increasingly difficult to know which ones are actually having an impact on “curing cancer” – never mind the fact that the real “cure for cancer” is likely to be early detection, something being worked on aggressively by startups like Grail. Buying some shares in companies like Magenta seems to have a similar effect as giving to a cancer charity, except in this case you’re getting some skin in the game.
Magenta is looking to raise $100 million with their IPO and plans to trade under the ticker “MGTA”.
Here at Nanalyze, we write about tech stocks a lot, but most of our money goes into a dividend growth strategy. Our 30 dividend stocks provide an income which increases every year. Find out how to build your own growing income streams with dividend growth stocks - Quantigence - A Dividend Growth Investing Strategy - freely available to Nanalyze Premium subscribers.