Novartis has offered to acquire CellforCure in order to expand its manufacturing capacity for innovative cell and gene therapies. The proposed acquisition builds on an existing partnership between the two firms which involves contract manufacturing of Novartis’ CAR-T cell therapy Kymriah (tisagenlecleucel). Specific cost details have not yet been announced; however, Novartis has stated that it expects the deal to be funded through available cash and to close in H119. The deal is subject to customary closing conditions, employee consultation and regulatory approvals.
When completed the acquisition will significantly bolster Novartis’ manufacturing capabilities in Europe. Novartis believes the acquisition will also increase manufacturing capabilities for other cell and gene therapies in the company’s pipeline, which is extensive. Novartis had previously stated intent to invest EUR78.8mn (USD90.3mn) into its cell and gene therapy manufacturing operations in Switzerland. The new manufacturing facility was reported to employ up to 450 workers in three years. The company expects to deliver its first products from the new facility in early 2020. This will likely remain the plan for Novartis in addition to the utilisation of CellforCure’s 3,600 sq m Les Ulis facility in the near-term.
Continued manufacturing issues may be prompting Novartis’ investments. The move may have been prompted by recent problems with variability in product specifications from its US facility that currently produces Kymriah for the European market. The drugmaker has stated that it is working on a list of improvements to the process but acknowledges that some doses are still not meeting specifications, a problem that Liz Barrett, CEO of Novartis Oncology, outlined earlier in 2018 to shareholders. She noted that there was an issue around cell variability when treating relapsed large B-cell lymphoma that involved the number of inactive cells, which has sometimes resulted in the drug being out of spec from the commercial specs.
Main competitors in the space are also investing in manufacturing. Gilead Siences confirmed plans to open a facility in the Netherlands to support manufacturing of Yescarta (axicabtagene ciloleucel). Gilead announced in May 2018 that it has leased a 117,000 sq ft site, strategically located near Amsterdam airport as CAR-T therapies are uniquely time sensitive and require extraction, engineering and reinfusion within a short window. Gilead expects the facility to be fully operational by 2020 putting the two companies on equal footing regarding manufacturing upgrades. In the European market, Novartis is dominant compared to Gilead in terms of overall revenues. Novartis’ presence in this market will aid it in establishing a European CAR-T market along with its new manufacturing sites, Novartis looks set to out compete Gilead in the coming years until Gilead’s new facility is up and running.
Manufacturing CAR-Ts is a costly and expensive process. Manufacturing of CAR-Ts is complex. Blood samples must be extracted from the patient and cryopreserved so that it can be shipped to a manufacturing facility, currently, Novartis’ facility is in Morris Plains, New Jersey. The patient’s cells must then be reprogrammed and manufactured in the lab. Finally the treated cells must be cryopreserved and sent back to the patient for infusion. The process for both Novartis and Gilead’s CAR-T products takes around 20 days. With facilities in Europe as well as the US, both companies will benefit from reduced manufacturing costs, which could reduce the shelf-price of the CAR-T products and increase uptake of the therapies.
Competition in the CAR-T space will require existing firms to innovate and invest in order to stay competitive. Novartis and Gilead’s CAR-T products were approved within months of each other for similar indications. In order to remain attractive, the companies must reduce costs, as pricing is the main barrier to uptake in Europe. Novartis and Gilead will both be aiming to expand indications for their products, speed up manufacturing, and reduce costs, in order to remain dominant in the space and capture significant sales across a variety of cancers. Indeed, Novartis reports that it intends to automate much of the process over the long term to reduce costs and waiting times, including creating a custom-built system that would consolidate a range of blood processing equipment into one automated unit. However, R&D is turning towards development of off-the-shelf therapies, which will be cheaper to manufacture, and we will see both Novartis and Gilead to invest here to remain competitive.