GRTS: Embarrassment of T Cell Riches
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Eighteen months ago a new species of coronavirus now widely known as COVID-19 sent the world into disarray. Markets plunged as the global economy came to a grinding halt so that governments could blunt the trajectory of the rapidly spreading and evolving virus. In the United States alone there have been >36M reported cases, ~600K of which ended in death (and counting). American biotech companies in partnership with US government agencies, namely the National Institute of Health (NIH) and Biomedical Advanced Research and Development Authority (BARDA), swiftly initiated clinical testing of therapeutics and vaccines.
Although therapeutics played a crucial role early in the pandemic, and continue to do so, it’s the vaccines that have proved the most remarkable. In particular, the mRNA vaccine platforms which until recently were largely unproven. Among the ~100 companies globally with COVID-19 vaccine programs, only 11 have earned emergency use authorization (EUA). In the US there are only three: Moderna (MRNA), Pfizer (PFE)/BioNTech (BNTX), and Johnson and Johnson (JNJ) (viral-based). The key advantages (figure 1) of mRNA vaccine platforms over conventional protein or viral-based vaccines are 1) greater efficacy, 2) quicker to develop, and 3) increased manufacturing flexibility.
Figure 1: Source: MRNA Vaccine Day Presentation
At the outset investors and healthcare professionals alike were rightly skeptical that a safe and effective COVID-19 vaccine could be developed in a year (traditionally takes 5-10 years). MRNA and PFE/BNTX did it in even less time with JNJ not far behind. The reason that MRNA and PFE/BNTX were able to develop their vaccines so quickly is because of the aforementioned benefits of mRNA technology. What’s even more impressive is that the companies were able to do it without sacrificing efficacy or safety. In their respective P3 studies the MRNA and PFE/BTNX mRNA vaccines (2-doses ~3 weeks apart)) were 94% and 95% effective, respectively, at preventing infection with COVID-19. JNJ impressively achieved an 85% efficacy rate with a single dose of its viral-based vaccine.
The real-world data appeared to align quite well with the clinical data, that is until the delta variant emerged. The issue is that after 6-12 months COVID-19 antibodies begin to wane. T-cells on the other hand, specifically CD8+ memory T cells, remain vigilant for decades as we’ve learned from plasma samples from individuals who recovered from SARS in 2003. Thus, it’s no surprise that MRNA and PFE/BNTX have been pushing for EUA for their booster vaccines (and even got approval on 8/12/21 for the immunocompromised). Meanwhile, Gritstone Bio (GRTS) in collaboration with the National Institute of Allergy and Infectious Diseases (NIAID) is quietly advancing its next-generation heterologous (viral + self-amplifying-mRNA) Prime (viral)/Boost (sa-mRNA) COVID-19 vaccine and booster. Data to date suggests that GRTS’s heterologous vaccine confers the same advantages outlined in figure 1 in addition to generating a robust CD4+/CD8+ T-cell (naïve and memory/cytotoxic) response unmatched by any platform. In our view, GRTS will start to get its COVID-19 program priced in once more data emerges.
Early Validation of GRTS Platforms
In 2019, GRTS reported initial P1 data in cancer patients demonstrating “unprecedented levels of primed CD8+ neoantigen-specific cytotoxic T cells and expansion of pre-existing T cells even in low-dose cohorts”. President and CEO of GRTS Dr. Andrew Allen characterized the results as “important de-risking data”. We agree given that the premise of GRTS’s heterologous Prime (virus)/Boost (sa-mRNA) strategy is that switching vectors induces a robust T cell assault against specific antigens (short proteins on the surface of cancerous and infected cells). Then in July of last year, additional P1b data in patients with advanced colorectal, GEA, and Lung cancer emulated this immunogenic response and even showed signs of clinical benefit.
GRTS Platform Now Being Applied to Improve 1st Gen COVID-19 Vaccines
We argue that there is a gap left by 1st gen vaccines which only train the immune system to recognize the Spike protein. Scientist seem to agree that to beat COVID-19 we need a vaccine that provides humoral (antibody) protection against spike AND T cell-mediated immunity against other viral proteins. Such a vaccine could arguably defeat COVID-19 and protect against future coronavirus outbreaks. To this point, a study published August 17 in the journal Cell Reports showed that in mice an mRNA vaccine with Spike + Nucleocapsid antigens provided better protection than Spike only. Specifically, researchers saw that the Spike only vaccine conferred acute protection in the lungs but not the brains of mice. Whereas the Spike + Nucleocapsid-based vaccine protected against breakthrough infection and provided acute protection in the lungs and brain.
Based on compelling clinical data in cancer and preclinical data in non-human primates (NHPs) we believe that GRTS’s heterologous vaccine and/or booster could play a major roll in ending the pandemic and protecting against new ones. Importantly, the need for such a vaccine is even starker in immunocompromised individuals undergoing cancer therapy, organ transplants and the elderly. As we saw earlier this year in his testimony before the senate Dr. Fauci seems to be of this mindset that there is room for improvement:
“NIAID researchers analyzed the immune responses of individuals who recovered from COVID-19 prior to the emergence of variants and demonstrated that T cells – a key component of the immune response to SARS-CoV-2 – were also capable of recognizing the three most widespread SARS-CoV-2 variants, B.1.1.7, B.1.351, and P1”
“On March 25, 2021, NIAID launched a Phase 1 clinical trial in healthy adults to assess the safety and immunogenicity of second-generation COVID-19 vaccine candidates developed by Gritstone Oncology, Inc. Gritstone’s COVID-19 vaccine candidates utilize a strategy aimed at inducing both neutralizing antibodies and T cell responses to elicit a broad immune response. This approach could provide protection against emerging SARS-CoV-2 variants by targeting several viral antigens, all of which are highly conserved among viral strains.”
Real-world data, including breakthrough infections, suggests MRNA and PFE vaccines wanes and are less effective against the Delta variant
More than six months since Dr. Fauci testified about the potential need for a vaccine such as GRTS’s his fear seems to have materialized with the delta variant. A few weeks ago the CDC reversed its stance on masks with many states reimposing mask mandates and other countermeasures to blunt the trajectory of the rapidly spreading delta variant. A recent pre-print study of hospitalization data collected at the Mayo Clinic investigated the efficacy of the MRNA and PFE/BNTX vaccines against the Alpha and Delta variants.
Researchers performed a retrospective analysis of patients admitted with PCR confirmed COVID-19. The vaccines maintained exceedingly high efficacy profiles at preventing infection by the Alpha variant (85% and 76%, respectively). This dropped considerably against the Delta variant (to 76% and 42%, respectively) (table-1). Scientists that developed the MRNA and PFE/BNTX vaccines, as well as other key opinion leaders, agree that antibody protection will diminish over the coming months and years.
Unfortunately, though, with boosters developed using the same technology we are stuck playing whack-a-mole every time a new variant emerges which is looking more likely with the delta variant replicating rampantly (more replicating= more opportunities for mutations). That’s where a viral primed, sa-mRNA boosted vaccine like GRTS’s that can target more than just the Spike protein differentiates itself, as Dr. Fauci discussed.
While the first-gen vaccine’s efficacy against early variants was impressive, Delta and other variants of concern are proving more challenging. You or someone you know have likely heard of fully vaccinated people receiving a positive Covid-19 test recently (breakthrough case). On August 2, 2021, Lindsey Graham made headlines after becoming the Senate’s first “breakthrough case”. While the Senator was fortunate enough to have mild symptoms and was glad to have the first-gen vaccine as the first line of defense, the trend appears to be intensifying.
Delta was estimated to represent 83% of COVID cases on July 20 in the U.S. and is having a ripple effect in hospitalizations amongst younger age groups. To get a better idea of Delta’s potential impacts, many experts have been assessing data from India and the U.K. The nearly twice as transmittable variant which was first detected in these two regions in December has largely been attributed to the monstrous spikes in cases and hospitalizations. India quickly became the epicenter of the pandemic after breaking records with multiple days of >400,000 recorded daily cases. Soon after India’s spike, the U.K. followed, nearing its January peak. During the recent spike, concerned observers were quick to point out the countries near 70% vaccination rate and high uptick occurring during warmer months. Experts are looking back to these upticks as a delayed impact appears to unfold in the U.S. and other regions.
Similar to the U.K. and India, countries with relatively high vaccination rates are beginning to show concerning upticks in infections and hospitalizations. Iceland has 71.5 % fully vaccinated at the time of this writing. Israel 59.7% fully vaccinated and the U.S. 50.9% fully vaccinated (source: Our Word in Data)
Unfortunately, we still have a lot to learn about the Delta and other variants. With the majority over 80% of infections attributed to Delta, data is beginning to be tracked on breakthrough cases. General breakthrough infections are yet to be properly tracked, but the trend in hospitalizations amongst fully vaccinated people provides us with an early data point.
Thankfully the majority of breakthrough cases appear to be mild and infrequently end in the ICU for now. While the likelihood of severe infection is currently low, the statistics are rapidly changing. Concerning metrics experts are paying close attention is the spike in admissions of younger age groups. Just months ago it was outlandish to see breakthrough cases, now it is increasingly becoming commonplace. As first-gen vaccines efficacy continues to wane and variants of concern continue to emerge, the need for a viral primed, sa-mRNA boosted vaccine which is capable of targeting more than just the Spike protein is becoming actively validated through real-world data. Source: The New York Times
GRTS’s heterologous vaccine-elicited robust antigen-specific CD4+/CD8+ (cytotoxic and naïve) T cells in NHPs relative to convalescent plasma and other mRNA vaccines. Moreover, this was observed in cancer patients adding confidence that the effect translates in humans.
- Figure 2: Source: GRTS COVID-19 Presentation: Leading first-gen vaccines seem to drive low or variable CD8+ T cell responses to the Spike protein
- Figure 3: Source Sahin et al 2020: showing markedly less median (horizontal line) CD4+/CD8+ T cell responses in NHPs treated with PFE/BNTX vaccine compared to GRTS hetero vaccine (see figure 4)Figure 4: Source: GRTS investor presentation: Shows 3-6X CD4/8+ T cell response (compared to figure 3)
- Figure 5: Source: GRTS investor presentation: Shows exceedingly high antibody response elicited by GRTS’s vaccine in NHPs. The response is comparable, if not better, than the early antibody data for first-gen vaccines
- Figure 6: Source: GRTS investor presentation: P1b data showing CD8+ pools in heavily pretreated patients with advanced colorectal cancer on checkpoint inhibitors
In figure 2 we see clearly that C8+ T cell responses against the Spike protein after the second 100 ug dose of the MRNA vaccine were minimal. The same theme was detected in a study (Sahin et al 2020) evaluating the T cell response generated by the PFE/BNTX vaccine in figure 3. Furthermore, in another study evaluating the efficacy of MRNA’s vaccine in organ transplant patients investigators noted two doses of the MRNA vaccine conferred suboptimal immunogenicity. Specifically, there were nominal polyfunctional CD8+ T-cell responses.
Looking at figures 4 and 5 we see that GRTS’s heterologous vaccine generated not only robust antibody responses (including neutralizing against Spike), but also CD4/8+ T cells (naive ad cytotoxic) in NHPs. Given the potential for its vaccine to fill this gap through an enhanced immune response GRTS is evaluating its vaccine in immunocompromised individuals as well as healthy adults giving the company additional shots on goal. This latter patient population is one that the other vaccines have struggled with the most as highlighted in this publication. A final key differentiator for GRTS next-generation mRNA vaccine is the fact that you can fit almost 5X the number of nucleotides into sa-mRNA compared to mRNA (2K vs. 9.5K). This enables GRTS to fit sequences for antigens of COVID-19 other than just the Spike protein like the first-gen vaccines. This SAM platform further enables a large amount of antigen production from a small vaccine dose (source: nature reviews drug discovery). Many first-generation vaccines are failing due to their inability to cover spike proteins without limitations. They can’t fit the entire S genome, leading them to go with S1 only which is the surface of Spike proteins and is now mutated.
Now that we’ve covered the dire need for a heterologous vaccine that generates robust CD4+/CD8+ T-cell response, let’s dive into the state of Gritstones business.
GRTS Financial and Business Discussion
With $176.2 million in cash, cash equivalents, and marketable securities as of June 30, 2021, the stock market is currently valuing Gritstone near its enterprise value of $232.94 million (market cap roughly $380 million as of August 12, 2021). Shares have exchanged hands from $4 all the way to 35 since January 4th. During this time, the covid-19 vaccine race has seen many contenders get funding pulled and drop out of the race. On April 23, 2021, Inovio shares declined on news of the DoD pulling its support of their Phase 3 covid-19 study. Soon after on May 25, the FDA announced that they will likely decline new EUA requests from companies that are not meeting with the agency. On August 5th, Novavax made headlines after announcing that the U.S. will pause its funding for its covid vaccine production. GRTS has seemed to avoid the spotlight in recent months but has continued to progress their studies. While many companies are getting funding pulled and dropping out of the race for next-gen covid vaccines, GRTS is pushing forward with updates most recently made on July 2, 2021.
Gritstone’s cash position was strengthened by private placement on December 28 for $125 million. Adding to this capital, the company inked a deal on February 1, 2021, with Gilead. Under the terms, Gritstone received a $60 million payment at closing, $30 million in upfront cash, and $30 million in equity investment at a premium. In addition to the $60 million upfront, Gritstone is eligible to receive up to $725 million (pending clinical, regulatory, and commercial milestones) as well as single-digit to low double-digit tiered royalties on net sales if/when approved. In exchange for the upfront infusion, Gilead is responsible for conducting a Phase 1 study for an HIV vaccine and has an option to obtain an exclusive license to develop and commercialize the vaccine beyond Phase 1.
Looking back at precedent for similar agreements, Translate Bio and Sanofi’s mRNA vaccine agreement in July of 2020 come to mind. Under the terms of their deal, TBIO received $425 million upfront in payment and equity investment as well as an eligibility to receive $1.9 billion in potential milestones. Under this agreement, Translate Bio agreed to give up 10 indications for $1.9 billion. This equates to roughly $190 million per indication while GRTS agreed to one indication for over $725 million. Ultimately Sanofi found value in the relationship and decided to acquire TBIO on August 3, 2021, for $3.2 billion ($38 per share).
While the team at Gritstone has been hard at work during 2021, shares have yet to reflect their progress. After spiking to the $30s in January on news of their second generation NIAID-backed Covid-19 vaccine and inking a favorable deal with Gilead, shares have been under relentless pressure. Despite the share price performance in the first half, investors have plenty to look forward to with a catalyst-filled second half. As Delta and emerging variants continue to evolve, we believe GRTS presents a favorable risk-reward profile with an impressive pipeline and potential to address the existing gaps in first-generation vaccines as the virus continues to evolve.
We are long GRTS.