Autolus

Description

Autolus is a clinical-stage biotechnology business at the forefront of a revolution in cancer treatment. The company was founded in 2014 based on advanced cell programming technology pioneered at University College London and operates in the fast-developing and rapidly growing immuno-oncology sector.

The business focuses on developing and commercialising a novel class of immuno-oncology treatments known as CAR-T (Chimeric Antigen Receptor T-cells) therapies, which harness the power of a patient’s immune system to combat cancers.

We were introduced to Autolus by Syncona and, following more than six months of due diligence, we first invested in March 2016, leading the company’s series B funding round. The position has been held in the Woodford Equity Income Fund and Woodford Patient Capital Trust ever since. The company listed on the Nasdaq stock exchange in June 2018.

Investment case summary

The investment case in Autolus centres on its fast-evolving, next generation technology for the development of CAR-T therapies, which are personalised treatments that can be game-changing for cancer patients. This new area of oncology has been attracting increasing attention recently, as evidenced by a series of deals in which major pharma companies have acquired exposure to CAR-T specialists such as Kite Pharma and Juno Therapeutics.

We believe that Autolus has a compelling technological advantage over other CAR-T businesses. By using dual-targeting CAR-T’s – engineering an immune cell to recognise two cancer cell-specific features, not just one – the treatment is less likely to result in the cancer escaping and reoccurring, one of the most common reasons for the current CAR-T therapies to fail. Autolus has already built an attractive portfolio of dual-targeting therapies which includes AUTO3 – the company’s potential treatment for certain types of blood cancers, and AUTO2 – its potential treatment for multiple myeloma (a type of bone marrow cancer). The company is also developing multiple other features such as a ‘safety switch’ to help reduce the risks of unwanted side effects, and a feature with the ability to recognise and challenge a hostile tumour environment that is trying to resist CAR-T cells. Meanwhile, AUTO1 is also demonstrating encouraging progress in clinical trials as a potential therapy for acute lymphoblastic leukaemia, with a superior toxicity profile to existing treatments.

From our perspective, the technology and drug candidates under development look fundamentally undervalued. The company has a broad, extensive pipeline and an impressive strategic plan of attack. The price tags attached to the recent acquisitions of other CAR-T businesses shine a very positive light on the future potential of this exciting field and, given its technical edge, on Autolus specifically.

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Fund exposure
Income Focus Fund 2.01%
Equity Income Fund 3.54%
Patient Capital Trust 9.33%

As at 31 March 2019

Segmentation
Geography United States
Industry Health Care
Themes Healthcare innovation

Source: Woodford

Share price

Commentary

R&D day

I have just attended Autolus’ R&D day, which was a very well-attended event at which the company did a great job of presenting its novel technology platform and its broad set of game-changing clinical programmes. I have simplified some technical language and concepts below as best I can, but for those who just want a summary, Autolus showcased a phenomenal pipeline of clinical stage and next generation programmes. It currently has five programmes in clinical development – three of these could progress to Phase II this year. Based on comparisons with competitor CAR-T businesses, it is not hard to justify a share price that is at least three times today’s level.

Autolus walked the audience through its suite of next generation and emerging products, beyond the lead candidates currently in clinical development. A key message from the presentations was that it aims to “break the problem of combinatorial approaches to immunotherapy”, by having a superior engineered modular CAR-T therapy for a range of different cancers. The concept of combination (double, triple etc) therapies has been a popular pathway for immunotherapy development but they can become very expensive and toxic. There are currently more than 1,100 combination therapies (double, triple therapies etc) in clinical trials – not all of them are likely to show meaningful additive efficacy but will come at greater expense to healthcare payors and patients. The Autolus approach is a powerful one-therapy concept for treating different cancer types, using an advanced engineered T-cell.

As additional context, in discussion of the next generation approaches in the pipeline, Autolus introduced the concept of modular therapy. This is effectively engineering the immune T-cell with advanced capabilities. This modular programming aims to further improve efficacy & safety beyond approaches that the company has already deployed in its current suite of clinical candidates. For example, T-cells kill cancers incredibly well. However, cancer has a strong defence mechanism against them (in the form of the tumour micro-environment, which is complex and acts in different ways). For effective T-cell therapy, you need to overcome these defences. In principle, T-cells could be completely curative of cancer. Autolus showcased a new suite of enhanced T-cells, with extra modular functionality, potentially negating the need for any additional checkpoint therapy. This acknowledges that current immunotherapy solutions are not yet perfect, but the next generation of T-cell can be engineered to more effectively target the cancer, whilst also disarming inhibitory signal pathways within the T-cell – this is pretty ingenious.

Meanwhile, Autolus also aims to broaden its CAR-T cells for use in solid tumours. The complexity of solid tumours has meant no CAR-T has really progressed in solid tumours – thus far, they are only approved for blood cancers. Autolus introduced additional programmes in the form of AUTO6 and next generation AUTO6 (modular CAR-T) for a spectrum of tumours including small cell lung cancer (SCLC), melanoma, osteosarcoma, and AUTO7 for prostate cancer.

Returning to existing clinical programmes, Autolus gave positive interim efficacy data from the Amelia study in AUTO3 for paediatric patients with acute lymphocytic leukaemia (pALL), which provided further evidence to support the idea that it has the potential to become the best-in-class therapy for ALL and diffuse large B-cell lymphoma (DLBCL), by addressing persistence (where patients respond and, importantly, remain in response). The company also showcased the superior toxicity profile of AUTO1 in pALL. Existing CAR-T therapies for this indication have a high rate of cytokine release syndrome (CRS), which is a nasty toxic effect of therapy that means nearly half of patients require intensive care treatment. This significantly increases the total cost of therapy above the reimbursed list price (from $400,000 to up to $1m). Published data so far shows AUTO1 causes 0% grade 3 CRS, compared to 47% for Kymriah, the existing therapy from Novartis.

Autolus also talked about a completely untapped opportunity in peripheral T-cell lymphoma which is currently under analysts’ radar, and reminded the audience of the string of data milestones that are due this year, which could see Autolus progress three of its five clinical programmes into Phase II.

At a current market cap of $1.2bn, Autolus has substantial future growth potential. We believe the technology and drug candidates under development are fundamentally significantly undervalued. Allogene – a comparative business – recently IPO’d and currently has a $3.2bn market cap. This highlights a stark valuation delta. Autolus, is later stage, and in our view, has a more impressive technology platform. Looking at the opportunity in DLBCL alone, AUTO3 could generate $700-800m of sales at peak and underpin a $3-4bn valuation. This analysis ignores all other drug development candidates, indication expansion opportunities, as well as Autolus’ manufacturing capabilities and technology excellence. Nevertheless, it is helpful in highlighting the potential upside from here. Meanwhile, it is worth remembering that competitor CAR-T companies have been acquired at valuations between $9-12bn.

Lucinda Crabtree
26 March 2019

Clinical developments

There were some promising data updates from Autolus last week, regarding its lead programme, AUTO3. Summary data on two ongoing clinical trials has been published ahead of the ASH (American Society of Hematology) annual meeting, at which the company is presenting in early December.

First, the Phase I/II Alexander study is investigating AUTO3 in adult patients with diffuse large B cell lymphoma (DLBCL – a cancer of the white blood cells). Early efficacy at the lowest dose looks promising, with four out of five patients treated having a response to treatment (an 80% ORR – overall response rate). Two patients attained a ‘complete response’ to therapy. Importantly, AUTO3 has demonstrated a manageable safety profile in combination with the anti PD-1 therapy Keytruda.

Second, the Phase I/II Amelia study is looking at AUTO3 in paediatric patients with acute lymphocytic leukemia (ALL – another blood-based cancer). In the data we’ve seen so far, promising efficacy was demonstrated at a higher dose level, as four out of four patients achieved complete remission with no antigen negative escape (the latter being a sign that the tumour has evolved and is one of the hoped for differentiating features of this dual-targeted approach).

Throughout our investment in this business (pre- and post-IPO), we’ve had confidence in the technology and the early data has looked very promising. This latest data lends even more credibility and excitement to the investment case. We look forward to receiving more information from ASH next month, and further updates are due over the course of 2019.

Lucinda Crabtree
7 November 2018

Initial public offering

Autolus has this morning announced the pricing of its IPO at the top-end of the guided range, at $17 per share (technically, American Depositary Shares or ‘ADS’). The size of the offering has also been slightly increased to $150m, which gives an indication of the demand from within the investment community to participate in this IPO.

The value at which Autolus is held within the Woodford Equity Income Fund and Woodford Patient Capital Trust, will accordingly be immediately increased to reflect the IPO price, which stands at a 73% premium to the price of the last funding round in September 2017. Since leading the company’s series B funding round in March 2016, the value of the holding has also previously seen significant uplifts, to reflect the company’s clinical progress and its journey towards life as a publicly quoted business. Autolus shares commence trading on Nasdaq this afternoon.

We are delighted that Autolus has received such a positive reception from the wider investment community during the IPO process. Its proprietary T-cell technology, which harnesses the power of a patient’s immune system to combat cancers, places it in a strong position to drive meaningfully positive advances in the battle against cancer in the years ahead.

Saku Saha
22 June 2018

Initial public offering pricing

Following the announcement in May that Autolus, an unquoted holding in the Woodford Equity Income Fund and Woodford Patient Capital Trust, had filed for a proposed initial public offering (IPO) in the US, the pricing range has now been announced.

Autolus has disclosed an indicative pricing range of $15-17 per share (technically, American Depositary Shares or ‘ADS’), which implies a market capitalisation of $469m to $532m. Although the IPO may not necessarily conclude within this guided range, even at the low-end this would represent a substantial uplift on the value at which the position has been held in the portfolios. Specifically, based on the indicative range, the uplift would equate to +53 to +73% on the carrying value as at 30 April 2018, which reflects the terms of the September 2017 funding round.

There is an additional indirect benefit to both the fund and trust, through the holding in Arix Bioscience, which also has a stake in Autolus.

Autolus is an excellent business with impressive technology, developing assets in the very exciting field of Car-T oncology therapies. Given the valuations attached to other businesses in this area, we are not surprised to see this price range, which reflects a positive reception from the investment community thus far. At the same time, we believe there is considerable further upside potential should Autolus continue to develop its assets positively through the clinic. We expect further news in this regard towards the end of this year.

Saku Saha
8 June 2018

Initial public offering announcement

Today Autolus announced that it has filed for a proposed initial public offering (IPO) in the United States, intending to list on Nasdaq. An IPO has multiple benefits for Autolus, not least raising new funds for further business and pipeline development and increasing its profile within the biotechnology sector. We believe this is a very positive development for the company. A public listing can represent a natural next-step and a meaningful milestone for any early-stage company as it progresses towards commercialisation.

Saku Saha
8 May 2018

WPCT 2017 annual report case study

Living medicine
Autolus is at the forefront of a revolutionary immuno-oncology cancer treatment, dubbed the ‘living medicine’, that is offering new hope to cancer patients suffering from blood-related cancers such as lymphoma and myeloma.

CAR-T cell therapy involves extracting white blood cells from a patient and genetically engineering them to recognise and kill specific cancer cells before infusing them back into the patient. This treatment approach has turned from hope to reality as the first two products have received regulatory approval in the US, made by competitors Novartis and Kite (acquired by Gilead) following successful clinical trials. The potential in treating cancers is being recognised not just by big pharmas looking to acquire the next big innovation, but by investors and patients alike.

Founded just four years ago, Autolus, whose advanced cell programming technology was pioneered at University College London, is an early entrant in the CAR-T cell therapy space. Using its patent-protected technology, it has one of the most experienced management teams advancing CAR-T products beyond what its peers have already proven.

For example, by using dual-targeting CAR-T’s – engineering an immune cell to recognise two cancer cell-specific features, not just one – the treatment is less likely to result in the cancer escaping and reoccurring, one of the most common reasons for the current CAR-T therapies to fail. With its lead products already in development, Autolus has the potential to bring improved products to market ahead of any other company. The company is developing multiple other features such as a ‘safety switch’ to help reduce the risks of unwanted side effects, and a feature with the ability to recognise and challenge a hostile tumour environment that is trying to resist CAR-T cells.

The company has announced its intention to list on Nasdaq in 2018.

24 April 2018

Read the full report

Woodford Investment Management Ltd is authorised and regulated by the Financial Conduct Authority (firm reference number 745433). Incorporated in England and Wales, company number 10118169. Registered address 9400 Garsington Road, Oxford OX4 2HN.

Woodford Patient Capital Trust plc is incorporated in England and Wales, company number 09405653. Registered as an investment company under section 833 of the Companies Act 2006. Registered address Beaufort House, 51 New North Road, Exeter, EX4 4EP.

© 2019 Woodford Investment Management Ltd.
All rights reserved.

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