VAXXED: Boom or bust? With Chris Kallos and Pitt Street Research

In some ways, cancer vaccines are a history of hype and hope, over success. But that hasn't stopped people from trying. In 2024, biotech CEOs are hoping that this time, it's different.

Research houses are predicting significant market growth come 2030, mRNA vaccines are making it through to phase three clinical trials for the first time, and there are exciting new discoveries in technologies that have already been tried and tossed on the rubbish pile.

So we asked two life sciences analysts about what they think of this market and whether this time, it really will be different. With Phase III regular Chris Kallos and Pitt Street Research cofounder Stuart Roberts.

Chapters

• 2:41 Life sciences analyst Chris Kallos
• 10:57 Pitt Street Research cofounder Stuart Roberts

Transcript

Rachel Williamson: 0:00

Cancer vaccines have been a graveyard for biotech investment. So much hope with no return. But are the 2020s the decade when funders are finally proved right?

I'm Rachel Williamson, and this is Phase III.

A lot of money is again being pushed into cancer vaccines. And biotech CEOs are, again, calling a new era, and holding firm beliefs that this time it's different. But as you can probably tell, we've seen and heard this before.

In the 1990s, vaccines which used a type of immune activator named dendritic cells were the big hope. Biotechs and investors admitted defeat in the 2000s.

Then there's peptide cancer vaccines. They are the most studied at a phase 3 clinical trial level. But they have also been uniformly disappointing, as one research paper put it. 

DNA options have always been very tricky. After all, it's hard to get into a cell to change the DNA. But they're staging a comeback. 

And of course, RNA vaccines have been tried for decades. BioNTech started in 2008, while Moderna did its deal with Merck in 2016. 

Incidentally, in the late 2010s, experts were predicting cancer vaccines would be available in one to two years. It's been 40 years of hype and hope, followed by failure. 

In 2024, however, enthusiasm is back and it's all because of mRNA. As we all know, mRNA's big shot at success was the COVID 19 proof of concept and they are running with it. Both the Merck and Moderna collab and the BioNTech and Regeneron team have seen positive results from phase two melanoma clinical trials, and they're now starting phase three trials. In fact, Merck's chief medical officer, Eliav Barr, says a new era is here. 

Market research houses are forecasting the opportunity by 2030 as worth anywhere between $US14. 8 billion and $US42 billion, depending on which report you buy. So what do the experts think? First up is analyst Chris Carlos. 


What cancer vaccine companies in Australia are you watching? And why?

Chris Kallos: 2:47

Look, there are a couple. One is unlisted and it's a company called ImmVirX. CEO is Malcolm McColl. ImmVirX uses a virus that's yet to be disclosed, gravitates towards a particular marker on the cancer, what these products do is come in, target the cancer, lyses the cancer, so they crack it open, break it open, which allows the body then to activate its own immune system in response to the foreign bodies in the body. So it's, it has a dual action.

Rachel Williamson: 3:23

Who else?

Chris Kallos: 3:25

I like Imugene, they're doing something similar in that, in that space. They were for many years pushing forward with a product based around B cells. But my understanding is that they're out licensing that now. So that's the other company that I, that I pay close attention to. Look, these are all global pursuits. So I guess the, the comparable companies in the, in the US which is where most of the, the activities taking companies like BioNTech. Obviously Moderna, Merck has a, has a position in that. Another couple of companies that I've, um, look at from time to time is Gritstone Oncology and ImmunityBio. So it is a, it is one of the hotbeds in immuno oncology, but not the only one. I'd have to say CAR-T is probably the one that's on everyone's minds at the moment.

Rachel Williamson: 4:20

Well, cancer vaccines part of their promise is that they can be used with CAR-T therapy and actually make CAR-T therapy expand the function of it.

Chris Kallos: 4:29

Yes. So CAR-T therapy until now has been very successful in blood cancers, less so in solid, even though companies like Arovella are targeting solid in their clinical programs, but they have yet to go into patients. The other promise of a vaccine is that it's much lower cost. CAR-T cells, because of the engineering of the patient's T cell can cost up to half a million dollars for one dose. In the last 6 to 12 months, there has been some controversy around CAR-T cells and their off-target effects. The FDA has made a note of it what they're finding is in some cases they're actually leading to the formation of secondary cancers. So it's not without its problems, but it is, it has shown promise. So that's, that's an area that cancer vaccine, if they get it right, can be very highly specific and hopefully not have off target repercussions as, as in the case of CAR-T cells.

Rachel Williamson: 5:31

Now both of the companies that you mentioned, the Australian companies that you mentioned, they are in the earliest stages of developing therapies, which means there are many long years ahead and a huge amount of money needed before those ideas and those assets can be commercialized. So placing these companies and their tech in the wider realm of what's happening in cancer vaccines today. How attractive are they to investors?

Chris Kallos: 6:02

Well, cancer is a huge unmet need and there is no one single cancer. The FDA recognizes that. And as a result, we get all sorts of abbreviated clinical pathways that if, if there's sufficient promise shown, even in phase two, that can quickly move through to approval because the need is so great. So I think investors should be very aware that a phase two product can quickly move or even be out licensed by a major company. In fact, given the size of our life science sector and just the resources we have available, most of these companies will explicitly say to their shareholders, our strategy is to out license in phase two, and that makes perfect sense given the funding and resources required to go all the way.

Rachel Williamson: 6:55

That's why I ask you about how attractive they are to investors. Given the highly competitive and unforgiving nature of the cancer therapy market today.

Chris Kallos: 7:10

It depends on the indication. For argument's sake, let's take breast cancer. Breast cancer is probably the most, um, researched cancer we know of, and it's produced some fantastic results in survival rates. If there was another cancer product targeting breast cancer, it would have to run massive survive, massive phase three trials or phase two trials to make an incremental difference. If you have a rare cancer, like a, a myelofibrosis and you can come in with a very targeted approach, that means two things you can get support from the FDA in the form of an orphan drug designation, uh, abbreviated pathways. So what I would say is to be very cognizant of not only how strong the data is, has been to the, to date, but also what exactly is the cancer indication that the company thinks it's going to be targeting.

Rachel Williamson: 8:11

Yeah. I think it was Roche bought in, Roche paid $US 130 million seven years ago to get in on BioNTech's cancer vaccine. So that was already underway and they still haven't quite got there. So it's not an easy deal to do.

Chris Kallos: 8:29

It, it's not an easy thing because you, you're really, um, you're trying to make a product which is trying have a positive effect on the patient's immune system, not a negative effect. So yeah, with biologics it's always going to be difficult.

Rachel Williamson: 8:46

That was analyst Chris Carlos. It's the combination of CAR-T and vaccines that intrigues Chris. But he's also keeping a close eye on what even the big biotechs are trying to treat. Because with vaccines, most are going after the hardest to treat options first. A game plan that is normally the strategy of small early stage biotechs such as your Imugenes and ImmVirXs in Australia. After the break, we find out how another analyst thinks vaccines might fit into the new world order.

Charis Palmer: 9:25

Hi there, I'm Charis Palmer, producer of Phase III. When Rachel and I set about building a new podcast for life science leaders, scientists, and long suffering biotech investors, we looked at what was missing in this space. We believe Phase III serves an unmet need for in-depth conversations in a world where nuance matters and AI-written investment articles simply won't cut it. If you agree, please follow us and sign up to our newsletter via LinkedIn, pledge financial support at phasethree.Buzzsprout.com and rate and review the podcast on the podcast platform you use, to help bring it to the attention of others. Now, back to the show.

Rachel Williamson: 10:04

Phase III isn't a news podcast, but in this section, we do get a bit newsy. What will US president elect Donald Trump do for, or to, biotech during the coming four years? We're recorded with Pitt Street Research cofounder Stuart Roberts a week before the November 2024 election. He suggests one outcome, that the US government will start setting harder, lower limits on how much it is willing to spend on new therapies. Stuart forecasts that this is what will happen in all Western nations. And there will be one likely winner. In the case of cancer vaccines These may have an outsized role to play. That's if they can make very effective therapies cheaper and more widely applicable. so Who are the big investors in the sector and who have they been investing in over the last couple of years?

Stuart Roberts: 11:05

So it's the usual life science investment players like Oppenheimer, like OrbiMed, et cetera. They can all see that the cancer vaccine space is, is a place you want to be in.

Rachel Williamson: 11:14

Why? What's driving that for them?

Stuart Roberts: 11:18

Well, um, I believe that in our lifetime, maybe in your lifetime, you're a bit younger than I am by the looks of it cancer will become a manageable disease condition, not a death sentence. We're seeing the beginnings of that in, in, in various ways. And this has been a play that's been working itself out now in a number of strains since about 2010. So the discovery that the immune checkpoints could then arm a whole lot of, uh, immunotherapeutic ideas that had been building up. So the first checkpoint inhibitor was approved 2014. CAR-T came along in 2017. Anyone who, who does investing in this space, It's thinking of what's next. There are several more waves across the top. The biggest wave of all is just making checkpoint therapy and making CAR-T inexpensive. At the moment, it costs the earth, even though it's highly effective. You want to be able to bring that down to a cost that even the most socialized healthcare systems can afford. Um, We'll talk about mRNA later on. That's, that's going to be an important thing for the next couple of decades as well.

Rachel Williamson: 12:16

What are you watching globally? And which do you think have a real chance at commercialisation?

Stuart Roberts: 12:21

Well, so, so BioNTech in Germany, uh, is one to pay attention to, because obviously they're a world leader in mRNA. but the companies you want to pay attention to are ultimately big pharma makes a pivot. into new field. I reckon Pfizer, for instance, is going to be a player in this, in this longterm that you, you need to look at. Uh, AstraZeneca, the usual dinosaurs of big pharma are going to be big beneficiaries here.

Rachel Williamson: 12:44

Jefferies analyst Michael Yee thinks treating melanoma patients alone could make Moderna $US1 billion a year.

Stuart Roberts: 12:53

Melanoma's, the hottest. It's literally hot. Cause it fires up the immune system. One of the big challenges of immunotherapy going forward is to use it in can cancers that aren't so hot. that don't have such a, uh, an important immunologic profile. So Jefferies' correct. You can make a billion dollars a year just out of melanoma patients in the medium term. Ultimately, you're going to have to step out and, and treat some other cancers. And melanoma is a relatively rare cancer. More common in our part of the world because a lot of us are white skinned and there's a lot of sun out there. So we're more susceptible. But from a global perspective, it's not as relevant.

Rachel Williamson: 13:24

And this is where the vaccines are coming in, is that treating those cold cancers are the ones that are hidden from the immune system to light them up and then make those checkpoint inhibitors actually work on them. And you're also having to move from that old way of doing things, which is just smash the tumor and ignore the immune system. But to switch to engaging the immune system and, helping it to help itself, you have to move away from that because. If you're going to give an immunotherapy to someone whose immune system has been torched by chemotherapy or radiotherapy, it's not going to be nearly as effective, I...

Stuart Roberts: 14:00

Absolutely. We know that now, but up until now, the arsenal of doctors has been, has been relatively limited.

Rachel Williamson: 14:05

Let's talk about mRNA because mRNA combined with AI and immunotherapy advances generally is the technology that has kind of brought cancer vaccines back from the desert. Is mRNA the only real modality that's got legs these days? From an investor perspective, from a big pharma perspective, or are there others that you are watching as well?

Stuart Roberts: 14:26

Covid did, uh, mRNA a big favour by proving that it was effective as a vaccine modality. I'm not excusing some of the shortcuts that got taken to get those vaccines on the market, but what they built up was a solid body of evidence that you can generate a strong immune response, we knew that for a long time. It's just COVID gave us the testing platform. All, all of us who, who didn't have cancer, but were forced to queue up, to get the vaccines or willingly got the vaccines. Either way, that just shows how powerful that delivery mechanism is. And, and that's why that, that'll be such a powerful play going forward.

Rachel Williamson: 14:58

There's a company called Likang Life Sciences in China, and they have a tech that's based on both mRNA and dendritic cell therapy. That's a type of immune cell. So the cancer vaccine concept, it fits very well into the personalised medicine theme that everyone has been talking about for a very long time, but has generally been too expensive to really make a thing of. How much do you think go to market models have to change to allow for properly personalised cancer vaccines to be profitable? How...

Stuart Roberts: 15:34

So the big thing for investors in life sciences to understand is how strained budgets have become, uh, right around the industrialised world. Not only do did we rack up a lot of debt getting through through COVID, but as the population has aged, uh, structural deficits have been built in, and you generally got left wing parties around the world who haven't worried too much about deficits. So healthcare systems are going to be strained just by availability of resources. Now, pharma companies have to figure out how to deliver their therapies more cheaply or get more bang for the buck at the higher price. But out of those two, the healthcare systems are always going to choose the less expensive option. So what you're going to see in the future is I think a lot of mainly biological drug developers out of Asia who come up with low cost alternatives for stuff that have been pioneered in the, in the Western world. We'll get low cost CAR-T, for example, low cost antibody therapy. One of the strengths of, of Asian biotechs is, is the ability to, to keep going down the cost curve in terms of production costs for biologicals.

Rachel Williamson: 16:34

How can they do it more cheaply?

Stuart Roberts: 16:36

Where you've got a staged approach to manufacturing stuff where there are definite steps, you can always rip costs out of there. A lot of prices that we pay in the Western world for drugs are profits for big pharma. And a lot of that gets plied back into R&D. So obviously they earn every penny, but they're not too worried about production costs because the margins are so big. In Asia, they don't care as much about margins. But what they do care about is going down the cost curve and then building out to a a bigger quality market. Big pharma's got to wake up to that fast. Because I think the first of the really serious budget constraints to the health care system are coming. Possibly even as early as next year, should Trump win the election.

Rachel Williamson: 17:10

What is that going to look like then? Let's say Trump wins. 

Stuart Roberts: 17:13

It'll be a lot like what you and I experience here in, in health care in Australia. As in any kind of drug that's over a certain price, the health minister has to make a decision about whether to put that on the pharmaceutical benefit scale. We'll see less and less of the health minister fronting the camera saying, we're now paying for such and such because we can't afford it. And, and you and I as the consumer, unless we can pay for it ourselves, we'll end up with yesterday's therapies. Until the lower cost alternatives become available.

Rachel Williamson: 17:40

That was Pitt Street Research cofounder Stuart Roberts. 

Next episode, we go back to basics. Science that is. 

Provenge for prostate cancer is the world's first and only cancer therapy vaccine, but the tech, dendritic cells, has failed for every other cancer and burned through so much money. So why are Melbourne researchers going deep on this technology again? 

And mRNA this is still unproven in phase 3 clinical trials. So why is a Queensland team putting serious money and brains behind mRNA and specifically a cancer vaccine?