Tab Cel - Atara Biotherapeutics

The Science

Tab Cel, Tabelecleucel or allogeneic EBV-specific cytotoxic T lymphocytes ATL129 is a therapy that is currently being investigated by Atara Biotherapeutics for patients with EBV+ PTLD After Failure of Rituximab. 

EBV or Epstein-Barr Virus is a human gamma herpes virus, more commonly know as the virus to cause Glandular Fever. This virus asymptomatically infects over 95% of adults by age 30. Infection typically occurs in childhood and is often difficult to distinguish from a cold or flu. The virus establishes a latent infection with B-memory cells and lies dormant in the body in very low numbers. 

Patients with malignant bone marrow disorders and other disorders of the immune system often are treated by allogenic stem cell transplantation. This involves high doses of chemo/radiotherapy to destroy the patients immune system followed by a replacement of bone marrow stem cells. As the patients immune system is compromised during the procedure, latent EBV infections can be reactivated, causing severe morbidity and mortality in patients. 

PTLD (Post Transplant Lymphoproliferative Disorder) can present as the reactivated EBV virus can induct lymphocytes to multiply uncontrollably, forming EBV-positive B-cell tumours. 

To produce ATL129, T-cells are stimulated with EBV antigen presenting cells. This results in the expansion and proliferation of T-cells that are specific to EBV infected targets. These are stored for later therapeutic use in Human Leukocyte Antigen matched patients. 

ATA129 is given to patients intravenously three times a week for a five week cycle. Cycles may be repeated as necessary.

The Upside 

Tab cel has produced positive long term outcomes including durable remissions and encouraging safety findings in two Phase II studies. No patient that responded to Tab Cel in these studies, died of EBV+ PTLD. 

One and three year Overall Survival rates for Tab Cel treated patients with EBV+PTLD following HCT who failed rituximab was 68% and 55% respectively. Median overall survival was not reached after 23.3 months of follow up, whereas the expected median survival of patients with this condition is 16 to 56 days.

Tab Cel was associated with durable ORR (CR plus PR) of 69% in patients with EBV+ PTLD following HCT, respectively, who have failed rituximab.

Tab Cel was generally well-tolerated. Safety findings were consistent with previous reports of these studies with no new signals noted with additional follow up.

As expected the market for EBV+ PTLD is quite slim. The incidence of EBV+ PTLD is about 10% in patients that have alloHCTs. In 2012, there were 3,616 alloHCTs in England, so the number of patients that had EBV+ PTLD in England in 2012 was about 362. 

The population of England in 2012 was 53.49 Million and the population of the world hit 7 Billion in March 2012. Extrapolating the incidence of EBV+ PTLD across the whole world, we would get a figure of roughly 47,373. 

Rituximab is a similar treatment that is currently being sold to the NHS at £3500 for two 1000mg infusions. Using this data may or may not be accurate as a comparison for Tab Cel but for the sake of argument. 15 infusions are needed for a course of Tab Cel, thus at Rituximabs prices, this would be about £26,250 for a course of treatment. Of course some patients may receive more and some may receive less.

The response rate of Rituximab in patients with EBV+ PTLD is 68% so the remainder of patients would be eligible for Tab Cel. 32% of 47,373 is 15,160 patients a year. 15,160 patient at an average cost of £26,250 is £397,933,200 a year in sales. 

As there are two Phase III trials for Tab Cel, one for patients that have haemopoetic stem cells transplanted and one for solid organ transplantation, there could be double the amount of eligible patients that may have the therapy. Therefore double the sales.

Another point to think about is that the amount of patients having these procedures was growing at 7% a year back in 2012. So there could be a lot more than this now and in future. 

Tab Cel would not immediately command this amount of sales but I would argue that due the two points mentioned above, it would not be too far off. 

The Downside

At Atara's current price I believe it is very overvalued. The current share price is $37, there are 45.65 million shares outstanding meaning the market cap is $1.7 Billion. This is extremely surprising to me considering the company loses roughly $200 million a year. Luckily Atara has a cash reserve of about $324 million although a large proportion of this is tied up in short term investments. Risky considering the market outlook for 2019-2020. 

With the potential sales expected from Tab Cel at £397,933,200, this would be $514,654,000 a year. If we crudely assume these sales are almost all converted to profit, used to pay off the operating expenses of $200 million a year, then the company may become profitable. With hypothetical earnings of $314,654,000, if we divide by the 45.65 million shares outstanding to get the EPS, we get 6.89. By taking the Share Price of $37 and dividing by the EPS of 6.89 we would get the expected P/E ratio, 5.37. And finally by multiplying the P/E ratio and the earnings of $314,654,000 we get a Market Cap of $1.7 Billion. Exactly what the market cap is now. 

These calculations are all made on the basis that the Phase III trial for Tab Cel receives final approval. There is a 58.4% chance that Tab Cel receives final approval at its current stage. They are based on Atara converting all of its sales of Tab Cel to revenue. It is based on Atara receiving the maximum amount of sales for Tab Cel which would most likely take years. It does not take into account any other expenses for the company, trial costs, operating expenses, cost of sales etc. 

The Conclusion

I would not initiate any position in Atara anytime soon. I believe the market has played up to the hype that may have been produced around Tab Cel and is valuing the company at the price it should be if Tab Cel was approved. The trial results for Tab Cel are good and I would expect the therapy to pass Phase III trials. But at Atara's current price the risk/reward is too high. Perhaps if the price dropped by 50%, I may consider it. But this is unlikely considering the stage of Tab Cel's trials. 

Back in late 2018 the price was hovering around the $15 mark. this is the sort of price I would consider initiating a position. Now Atara is a missed opportunity or a very risky opportunity. 

On to the next one.

-OC

Disclaimer:

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company who is mentioned in this article. This article is not investment advice, and can't be relied upon by anyone for any reason except, arguably, entertainment purposes. I am not an investment advisor.