Author's note: The following consists of excerpts from my 45-page May 30 report on bluebird bio (NASDAQ:BLUE), Kite Pharma (NASDAQ:KITE), and Juno Therapeutics (NASDAQ:JUNO). The focus in this submission is BLUE. Please check out my Seeking Alpha profile for important information. Global Gene Therapy Market

The gene therapy market is gaining popularity in the global medical community. The advent of advanced techniques for gene transfer has enabled the use of gene therapy for various new applications. Although it is still at an infant stage, its promise has led to a range of bullish estimates. Market research firm BCC Research forecasts the global market for DNA vaccines to grow at a 54.8% CAGR to $2.7 bln by 2019, while two other observers -- Roots Analysis and Research and Markets -- predict the gene therapy market as a whole to reach ~$11 bln by 2025. Another report from market intelligence firm Transparency Market Research forecasts that the global stem cell market will grow at a CAGR of > 20% in the next few years and said there is a rich pipeline of more than 500 cell and gene therapy products, which will drive significant capacity as the pipeline matures and progresses to commercial supply.

Key factors driving market growth include demand for novel and efficient therapies to treat cancers and other indications with high unmet needs. Other market drivers include completion of the human genome project, rising incidence and prevalence of cancers and other critical diseases, and the prospective launch of gene therapies in major global markets.

Most gene therapy products are in the pre-clinical or clinical research stage. To-date, there are only five marketed drugs, namely Glybera, Neovasculogen, Gendicine, Rexin-G, and Oncorine. However, these products constitute very little revenue for the gene therapy market. Most revenue for the gene therapy market is generated from products used in clinical trials.

Need for gene therapy: It is estimated that, approximately 5% of the global population suffers from a rare disease and half of the global population affected by rare diseases are children, making rare disease treatment a concern for children across the globe. There are about 7,000 known rare diseases that comprise the most complex healthcare challenges for researchers and health professionals -- with most being difficult to diagnose due heterogeneity in disease epidemiology.

Rare diseases that affect 200,000 people in the US (as per the FDA definition) and a similar percentage in Europe are typically genetic in nature, and thus present a significant unmet need for potential regimes in the market.

As per World Health Organization, 80% of rare diseases are caused due to genetic abnormality and are inherited for generations. Approximately 5% of the rare diseases have a treatment and most of the current therapeutic approaches include gene therapy and cell therapy. A significant gap between demand and supply of rare disease drugs is expected to create a massive opportunity for manufacturers and researchers in the area of rare disease treatment.

How Does Gene Therapy Work?

Advances in biotechnology have brought gene therapy to the forefront of medical research. The prelude to successful gene therapy, the efficient transfer and expression of a variety of human gene into target cells, has already been accomplished in several systems.

Gene therapy may be defined as the introduction of genetic material into defective cells for a therapeutic purpose. While gene therapy holds great potential as an effective means for selective targeting and treatment of disease, the field has seen relatively slow progress in the development of effective clinical protocols. Although identifying genetic factors that cause a physiological defect is straightforward, successful targeted correction techniques are proving continually elusive. Hence, safe methods have been devised to do this (using several viral and no-viral vectors). Two main approaches have emerged in-vivo modification and ex-vivo modification. Retrovirus, adenovirus, adeno-associated virus are suitable for gene therapeutic approaches; these are based on permanent expression of the therapeutic gene. Non-viral vectors are far less efficient than viral vectors, but they have advantages due to their low immunogenicity and large capacity for therapeutic DNA.

Viral Vectors: These are virus-based vectors. Examples include retrovirus vector, adeno virus vector system, adeno associated virus vector, and herpes simplex virus. Extensive research is being conducted on the various viral vectors used in gene delivery. Non-viral Vectors: Examples of non-viral vector systems include pure DNA constructs, lipoplexes, DNA molecular conjugates, and human artificial chromosomes. Owing to the following advantages, non-viral vectors have gained significant importance in the past few years as they are less immune-toxic; there is risk-free repeat administration; and relative ease of large-scale production.

A major disadvantage is that the corrected gene needs to be unloaded into the target cell, and the vector has to be made to reach the required treatment site.

Gene therapy has transitioned from the conceptual, technology-driven, laboratory research, to clinical trial stages for a wide variety of diseases. In addition to curing genetic disorders such as Hemophilia, Chronic Granulomatous Disorder, and Severe Combined Immune Deficiency (ADA-SCID), it is also being tested to cure acquired diseases such as cancer, neurodegenerative diseases, influenza, and hepatitis.

Gene therapy is not limited to any particular disease. It is proving to be a promising treatment for rare diseases such as X-linked adrenoleukodystrophy. The therapy has proved effective in research conducted for the following diseases:

Fat Metabolism Disorder: Gene therapy is used to correct rare genetic diseases caused due to lipoprotein lipase deficiency. This deficiency leads to fat molecules clogging the blood stream. An adeno-associated virus vector is used to deliver the corrected copy of the LPL to the muscle cells. This corrected copy prevents excess accumulation of fat in the blood by breaking down the fat molecules. In 2012, the EU approved Glybera, the first viral gene therapy treatment for LPLD, manufactured by UniQure. Glybera is likely to be approved for the American market by 2018.

Adenosine Deaminase Deficiency: Gene therapy has successfully been used to treat another inherited immune disorder -- ADA deficiency. More importantly, none of the patients undergoing this treatment developed any other disorder. The retroviral vector is used in multiple small trials to deliver the functional copy of the ADA gene. Primarily, all the patients involved in these trials did not require any injection of ADA enzyme as their immune functions had immensely improved.

Severe Combined Immune Deficiency: A lot of documented work is already available regarding treating this immunodeficiency with gene therapy; however, clinical trials have not shown promising results. The viral vectors used during the trials triggered leukemia in patients. Since then, focus of the research and trials has been on preparing new vectors that are safe and do not cause cancer.

Hemophilia: Patients with hemophilia suffer excessive blood loss as the blood clotting protein (Factor IX) is absent. Researchers have successfully inserted the missing gene in the liver cells using an adeno-associated viral vector. After undergoing this treatment, patients experienced less bleeding as their body was able to create some of the Factor IX protein.

Cystic Fibrosis (CF): CF is a chronic lung disease caused due to a faulty CFTR gene. Genes are injected into cells using a virus. Recent studies also include testing the cationic liposome (a fatty container) to deliver DNA to the faulty CFTR gene, thus making the use of the non-viral gene carrier more successful. Phase II trials using this therapy were published in early 2015, which promised a novel therapeutic approach to CF.

-thalassemia: Clinical trials on gene therapy for -thalassemia (the faulty beta-globin gene, which codes for an oxygen-carrying protein in (RBC) can be tracked back to 2007. Blood stem cells were taken from the patients bone marrow and a retrovirus was used to transfer a working copy of the faulty gene. The modified stem cells were re-injected into the body to supply functional red blood cells. This treatment, once conducted, lasted over seven years, with the patient not undergoing blood transfusion during this time.

Hereditary Blindness: Currently, gene therapy is being tested to treat degenerative form of inherited blindness, where patients lose light-sensing cells in their eyes over time. Experimental data suggests that the animal models of a mouse, rat, and dog show slow or even reverse vision loss using gene therapy. The most important advantage associated with gene therapy for eye disorders is that AAV (adeno-associated virus) cannot shift from the eye to other body parts, and hence does not cause an immune reaction.

Parkinson's Disease: Patients with Parkinson's disease lose the ability to control their movement as their brain cells stop producing the dopamine molecule used for signaling. A small group of patients showed improved muscle control when a small area of their brain was treated with a retroviral vector that contained dopamine-producing genes.

This is because cancer genetics is a novel treatment method, marked by high R&D costs. The therapy targets diseases with high unmet needs; this has been the driving force behind academic research laboratories, small biotech firms, and large pharmaceutical companies. The therapy is of short-duration treatment or mostly one-time treatment customized to individuals, and often in small patient populations.

bluebird bio (BLUE) is a clinical-stage biotechnology company that focuses on developing transformative gene therapies for severe genetic diseases and cancer. Its product candidates include Lenti-D, which is in phase II/III clinical studies for the treatment of cerebral adrenoleukodystrophy -- a rare hereditary neurological disorder -- and LentiGlobin, which is in four clinical studies for the treatment of transfusion-dependent beta-thalassemia and severe sickle cell disease. The companys lead product candidate is bb2121, a chimeric antigen receptor (CAR) T cell receptor (TCR) product candidate that is in phase I trial for the treatment of relapsed/refractory multiple myeloma.

The company's gene therapy platform is based on viral vectors that utilize a non-replicating version of the Human Immunodeficiency Virus Type 1 (HIV-1). Its lentiviral vectors are used to introduce a functional copy of a gene to the patient's own isolated hematopoietic stem cells (HSCs) in the case of its LentiGlobin and Lenti-D product candidates, or the patient's own isolated white blood cells, which include T cells, in the case of its bb2121 product candidate.

BLUE has a strategic collaboration with Celgene Corporation (CELG) to discover, develop, and commercialize disease-altering gene therapies in oncology; with Kite Pharma (KITE) to develop and commercialize second generation T cell receptor product candidates against an antigen related to certain cancers associated with the human papilloma virus; and with Medigene (Germany) for the research and development of (TCR) product candidates directed against approximately four antigens for the treatment of cancer indications. Founded in 1992 and headquartered in Cambridge, Massachusetts, the company was formerly known as Genetix Pharmaceuticals and later changed its name to bluebird bio (Incorporated) in September 2010.

With its lentiviral-based gene therapies, T-cell immunotherapy expertise, and gene-editing capabilities, BLUE has built an integrated product platform with broad potential application for severe genetic diseases and cancer. BLUE's approach to gene therapy is based on viral vectors that utilize the Human Immunodeficiency Virus Type 1 or HIV-1. The HIV-1 vector is stripped of all the components that allow it to self-replicate and infect additional cells. HIV-1 is part of the lentivirus family of viruses. The vectors are used to introduce a modified copy of a gene from the patients own blood stem cells called hematopoietic stem cells (HSC), which reside in the patient's bone marrow. HSCs divide cells that allow for sustained expression of the modified gene.

Lenti-D

bluebird is developing the Lenti-D product candidate to treat patients with cerebral adrenoleukodystrophy.

Adrenoleukodystrophy is a rare X-linked, metabolic disorder caused by mutations in the ABCD1 gene, which results in a deficiency in adrenoleukodystrophy protein, or ALDP, and subsequent accumulation of very long-chain fatty acids. Symptoms of CALD usually occur in early childhood and progress rapidly if untreated, leading to severe loss of neurological function and eventual death.

Completed non-interventional retrospective study (the ALD-101 Study)

CALD is a rare disease, and data on the natural history of the disease, as well as the efficacy and safety profile of allogeneic HSCT, is limited in scientific literature. To properly design clinical studies of Lenti-D and interpret the efficacy and safety results thereof, at the recommendation of the FDA, bluebird performed a non-interventional retrospective data collection study to assess the natural course of the disease in CALD patients that were left untreated in comparison with the efficacy and safety data obtained from patients that received allogeneic HSCT.

For this study, data was collected from four US sites and one French site on a total of 137 subjects, 72 of whom were untreated and 65 were treated with allogeneic HSCT.

Starbeam Study (ALD-102) Phase II/III clinical study in subjects with CALD

The company is currently conducting a phase II/III clinical study of Lenti-D product candidate in the US, referred to as the Starbeam Study (ALD-102), to examine the safety and efficacy of Lenti-D product candidate in subjects with CALD. The study was fully enrolled in May 2015; however, in December 2016, the company amended the protocol for this study to enroll up to an additional eight subjects in an effort to enable the first manufacture of Lenti-D product candidate in Europe and the subsequent treatment of subjects in Europe, and to bolster the overall clinical data package for potential future regulatory filings in the US and Europe. It intended to begin treating the additional patients in early 2017.

The ALD-103 (observational) study

bluebird is also conducting the ALD-103 study, an observational study of subjects with CALD treated by allogeneic HSCT. This study is ongoing and is designed to collect efficacy and safety outcomes data in subjects who have undergone allogeneic HSCT over a period that is contemporary with the Starbeam study.

Lentiglobin Product

Transfusion-dependent -thalassemia (TDT)

-thalassemia is a rare hereditary blood disorder caused by a mutation in the -globin gene, resulting in the production of defective red blood cells, or RBCs. Genetic mutations cause the absence or reduced production of beta chains of hemoglobin, or -globin, preventing the proper formation of hemoglobin A, which normally accounts for more than 95% of the hemoglobin in the blood of adults.

Limitations of current treatment options

In geographies where treatment is available, patients with TDT receive chronic blood transfusion regimens. These regimens consist of regular infusions with units of packed RBC, or pRBC, usually every three to five weeks, to maintain hemoglobin levels and control symptoms of the disease.

The only potentially curative therapy for -thalassemia today is allogeneic HSCT. However, complications of allogeneic HSCT include risk of engraftment failure in unrelated human-leukocyte-antigen, or HLA, matched patients, risk of life-threatening infection, and risk of GVHD -- a common complication in which donor immune cells (white blood cells in the graft) recognize the cells of the recipient (the host) as foreign and attack them. As a result of these challenges, allogeneic HSCT can lead to significantly high mortality rates, particularly in patients treated with cells from a donor who is not a matched sibling, and in older patients. Overall, TDT remains a devastating disease, with an unmet medical need.

The Northstar Study (HGB-204) Phase I/II clinical study in subjects with TDT

The Northstar study is a single-dose, open-label, non-randomized, multi-site phase I/II clinical study in the US, Australia, and Thailand to evaluate the safety and efficacy of the LentiGlobin product candidate in increasing hemoglobin production and eliminating or reducing transfusion dependence following treatment. In March 2014, the first subject with TDT was treated in this study, and, in May 2016, the study was fully enrolled.

The study enrolled 18 adults and adolescents. To be eligible for enrollment, subjects had to be between 12 and 35 years of age, with a diagnosis of TDT, and received at least 100 mL/kg/year of pRBCs or more than or equal to eight transfusions of pRBCs per year in each of the two years preceding enrollment.

Efficacy will be evaluated primarily by the production of 2.0 g/dL of hemoglobin A containing A-T87Q-globin for the six-month period between 18 and 24 months, post transplants. Exploratory efficacy endpoints include RBC transfusion requirements (measured in milliliters per kilogram) per month and per year, post transplants.

The HGB-205 study Phase I/II clinical study in subjects with TDT or with severe SCD

bluebird is conducting the HGB-205 study, a phase I/II clinical study, in France to study the safety and efficacy of its LentiGlobin product candidate in the treatment of subjects with TDT and of subjects with severe SCD. In December 2013, the company said that the first subject with TDT had been treated in this study; in October 2014, bluebird declared that the first subject with severe SCD had been treated in this study. By February 2017, the study had been fully enrolled.

bluebird is conducting HGB-206 multi-site phase I clinical study in the US to evaluate the safety and efficacy of its LentiGlobin product candidate for the treatment of subjects with severe SCD. In October 2016, the company amended the protocol of its HGB-206 study to expand enrollment and incorporate several process changes, including updated drug product manufacturing process. Enrollment had begun under this amended protocol, and, in February 2017, the company treated the first subject under this amended protocol.

The Northstar-2 Study (HGB-207) Phase III study in subjects with TDT and a non-0/ 0 genotype

The Northstar-2 study is an ongoing single-dose, open-label, non-randomized, international, multi-site phase III clinical study to evaluate the safety and efficacy of the LentiGlobin product candidate to treat subjects with TDT and non-0/0 genotype. Approximately 23 subjects will be enrolled in the study, consisting of at least 15 adolescent and adult subjects between 12 and 50 years of age at enrollment, and at least 8 pediatric subjects less than 12 years of age at enrollment. In December 2016, the first subject had received treatment with the LentiGlobin product candidate.

The planned Northstar-3 Study (HGB-212) Phase III Study for TDT in subjects with TDT and a 0/ 0 genotype

The company plans the initiation of HGB-212, a phase III clinical study of LentiGlobin in patients with TDT and the 0/0 genotype in 2H FY2017.

bluebird expects to enroll up to 15 adult, adolescent, and pediatric subjects. The company anticipates that the primary endpoint of the Northstar-3 study will be transfusion reduction, which is defined as a demonstration of a reduction in the volume of pRBC transfusion requirements in the post-treatment time period of 12-24 months, compared with the average annual transfusion requirement in the 24 months prior to enrollment.

Sickle Cell Disease

SCD is an inherited disease that is caused by a mutation in the -globin gene; this results in sickle-shaped red blood cells. The disease is characterized by anemia, vaso-occlusive crisis, infections, stroke, overall poor quality of life, and, sometimes, early death. Where adequate medical care is available, common treatments for patients with SCD largely revolves around the management and prevention of acute sickling episodes. Chronic management may include hydroxyurea and, in certain cases, chronic transfusions. Given the limitations of these treatments, there is no effective long-term treatment. The only advanced therapy for SCD is allogeneic hematopoietic stem cell transplantation (HSCT). Complications of allogeneic HSCT include a significant risk of treatment-related mortality, graft failure, graft-versus-host disease, and opportunistic infections -- particularly in patients who undergo non-sibling-matched allogeneic HSCT.

In March 2017, bluebird announced the Publication of the Case Study on the First Patient with Severe Sickle Cell Disease Treated with Gene Therapy in The New England Journal of Medicine. Patient 1204, a male patient with S/S genotype, was enrolled in May 2014 at 13 years of age into the HGB-205 clinical study. The patient underwent a regular transfusion regimen for four years prior to this study. Over 15 months since transplant, no SCD-related clinical events or hospitalizations occurred -- contrasting favorably with the period before the patient began regular transfusions. All medications were discontinued, including pain medication.

The successful outcome in Patient 1204 demonstrates the promise of treatment with LentiGlobin gene therapy in patients with severe SCD and serves as a guide to optimize outcomes in future patients.

Celgene Collaboration

In March 2013, BLUE entered into a strategic collaboration with Celgene to advance gene therapy in oncology (cancer), which was amended and restated in June 2015, and amended again in February 2016. The multi-year research and development collaboration focused on applying BLUEs expertise in gene therapy technology to CAR T cell-based therapies, to target and destroy cancer cells. The collaboration now focuses exclusively on anti- B-cell maturation antigen BCMA product candidates for a new three-year term.

Under the terms of the Amended Collaboration Agreement, for up to two product candidates selected for development under the collaboration, BLUE is responsible for conducting and funding all research and development activities performed up through completion of the initial phase I clinical study of such a product candidate.

In February 2016, Celgene exercised its option to obtain an exclusive worldwide license to develop and commercialize bb2121, the first product candidate under the Amended Collaboration Agreement, and paid the associated ($10 million) option fee. BLUE will share equally in all costs related to developing, commercializing, and manufacturing the product candidate within the US, if it elects to co-develop and co-promote bb2121 with Celgene. In case BLUE does not exercise its option to co-develop and co-promote bb2121, it will receive an additional fee (of $10 million).

Summary

All three names in my May 30, 2017 (45-page) report are from the same space and I highly recommend taking a look at the entire report before making an investment decision. It is available on request.

This industry is in its infancy -- most trials are only in Phase I or Phase II. The companies do not have earnings yet and that makes them difficult to value today. In my opinion, the upside here is significant, but you may have to hold on to these names for a few years in order to realize that upside, because today an argument can be made that the stocks have gotten a little bit ahead of themselves.

I am keeping my Buy recommendation on Juno (unchanged) and I am keeping my Hold recommendation on Kite (unchanged). There are currently seven institutions (each) with stakes of at least 250 million dollars in BLUE. There are nine institutions (each) with stakes of at least 175 million dollars in KITE. With JUNO the institutional ownership is much lower -- many institutions probably got shaken out following deaths on the Juno trials last year. In my opinion the market over-reacted to those deaths. In fact, the shares have already bounced significantly since the low from last year following that market over-reaction (and insiders bought $500,000 worth of Juno shares recently).

I went in-and-out of KITE twice in the last couple of years and locked in gains of 35% both times. I most recently exited KITE at $87 a share on March 13.

The 52-week high on BLUE is $124 and the all-time high is $194.

There are 8,000,000 shares short and that is more than 10X the average daily volume.

My recommendation is to allocate 3% portfolio weight to this industry: 1.5% to BLUE, 0.75% to KITE, and 0.75% to JUNO.

I remember an analyst (many years ago) on CNBC defending his Sell recommendation on Amazon. It was trading at $100/share at the time. He defended the Sell rating by saying they lose money on every book they sell. AMZN recently hit $1,000 today. The lesson here is do not be afraid to invest in names with multi-billion market caps that are without EPS today. With KITE, BLUE and JUNO you must look out 3-5 years.

Sources

Why bluebird bio Stock Surged 20.7% Higher in January

Risks - Mayo Clinic

bluebird bio Reports First Quarter 2017 Financial Results and Recent Operational Progress

bluebird bio Announces Publication of Case Study on First Patient with Severe Sickle Cell Disease Treated with Gene Therapy in The New England Journal of Medicine

Annual Report 10K

Quarterly Report 10Q

Press Release | Investor Relations | Bluebird Bio

Kite Pharma (KITE) Posts Q1 Loss, Reveals CAR-T Patient Death

SHAREHOLDER ALERT: Bronstein, Gewirtz & Grossman, LLC Announces Investigation of Kite Pharma, Inc. (KITE)

KITE INVESTOR ALERT: Faruqi & Faruqi, LLP Encourages Investors Who Suffered Losses Exceeding $100,000 Investing In Kite Pharma, Inc. To Contact The Firm

SHAREHOLDER ALERT: Levi & Korsinsky, LLP Announces the Commencement of an Investigation Involving Possible Securities Fraud Violations by the Board of Directors of Kite Pharma, Inc.

Kite Investors See An Uncomfortable Parallel With Juno

Kite Pharma: History In The Making?

Kite Pharma: Still Time To Get In Ahead Of Lead Oncology Treatment Approval

Here's What's Dragging Kite Pharma Inc. Down Today -- The Motley Fool

Global Gene Therapy Market to Reach US$316 Million by 2015, According to a New Report by Global Industry Analysts, Inc.

Gene Therapy Market information, Current Trends Analysis, Major Players and Forecast 2024

Gene Therapies Market will generate $204m in 2020

Cancer Gene Therapy Market size to exceed $4.3bn by 2024

Could gene therapy become biotech's growth driver in 2017?

Cell Therapy 2016 - Year in Review (part 1)

Cancer Gene Therapy Market Size, Share, Industry Report 2024

Gene Therapy Market information, Current Trends Analysis, Major Players and Forecast 2024

Gene Therapy Clinical Trials Worldwide

http://www.bath.ac.uk/bio-sci/hejmadi/gene%20therapy%20rev%20els.pdf

Aranca Report - GENE THERAPY: Advanced Treatments for a New Era

International Journal Of Pharma Sciences and Research (IJPSR) - Gene therapy: Current status and future perspectives Gene Therapy Institute for Clinical and Economic Review

See the article here:
Biotech Gene Therapy names Juno, Kite, and Bluebird Bio still have room to run - Seeking Alpha

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