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Stephen Chang is a scientist and entrepreneur with over 30 years of experience in gene and cell therapy.

Brett Johnson: Can you tell us a bit about your background in the field of biotechnology and specifically cancer?

Stephen Chang: I am a human geneticist by training, and have been interested in the genetics of many different diseases. Specifically, in the 80’s, I got interested in the genetics of infectious disease and cancer, novel therapies. One of the areas that became obvious to me was the potential of gene therapy, and it kind of morphed into both gene and cell therapy. That was in the late 80’s, where we started a gene therapy company, Viagene, Inc. I’ve been involved in the gene therapy area for at least 30 plus years.

BJ: What company were you involved in? What was your experience at that firm?

SC: We were one of the first of the early gene therapy companies, Viagene. I believe there was only three at the time. I guess what I learned was that the technology was very powerful, and it could be applied to many different scenarios, from single gene defects all the way to very complex diseases. I think it’s been evident by that resurgence in the area of use of gene therapy for a variety of diseases, and the ability to modify cells, such as the CAR-T cells.

BJ: So, where are we at today versus 20 years ago when you started working on this?

SC: Well, its been almost 30 years since we started working on it. I think I published my first paper in 1984 on this. What it was is persistence, patience, and waiting for clinical results. What I can tell you is that much of the pre-clinical biology doesn’t necessarily replicate in humans.

What you must do is continual experimentation in a very safe manner. One of the issues with gene therapy in the late 90’s was an unfortunate accident at UPenn, which caused the field to slow down, especially in the area of gene therapy and also slowed down cell therapy.

I think the compelling data that’s been generated in the cell therapy space, with CAR-T, has shown that it’s a very viable therapy and consequently a very viable business. There have been several mergers or acquisitions and billions of dollars for these nascent technologies.

BJ: What would be some of the most interesting transactions that you’ve seen over the last few years?

SC: Well, you’ve seen Novartis buy into the CAR-T space, and then Novartis buying a gene therapy company for a metabolic disease and I think that Novartis continues to be interested in that. You saw the Gilead acquisition of Kite and the Celgene acquisition of Juno. I think all those are important. Consequently, Celgene, being bought by Bristol Myers Squibb showed that the field is ripe for mergers, because products are coming out of the pipeline now.

BJ: How many products do you think are in the pipeline?

SC: I must look that up, but it’s probably in the 25 to 50 range at this point, if not more in the area of cell therapy and the area of gene therapy, which is just essentially a viral vector system using primarily viral vectors. That’s now probably in the 50 in 100 range, and then combining it with both cell and gene therapy. Off the top of my head, it’s probably greater than 100 as 150, as well.

BJ: So, at what stage are these 50 to 100 products?

SC: I’m only talking about ones that have started initial clinical trials. So, phase one, even two studies, and a few phase three. One of the products that I worked on, which was an interferon gene therapy, that started in 2000, and it’s just completing its clinical trials. It’s going to be interesting to see what that result is.

BJ: So, in terms of time, it is typically a 10 or 20 year process from start to finish?

SC: Yes, a 10 year to 20 year time frame. I think if you look at the CAR-T history that Carl June did, most of that work was originally funded by grants, going back into the early 1990’s. I was on the review panels for some of those grants. And that was just beginning the funding of work that eventually led to the CAR-T success, which was just four or five years ago.

So, if you look at the time frame, it’s about a 20 year time frame. But you’ve got to have a lot of persistence. And you’ve got to have vision. I mean its vision, persistence, and just more persistence. If you can show it works in some compelling scenario, I think it just requires persistence, which in many cases, it’s purely capital driven.

BJ: And what is the amount of capital needed today to get one of these all the way through?

SC: Nowadays, for some of these biologics, could be average. But these cell therapies, you’re talking close to a half a billion dollars, it might be a little more, and it might be a little less. The real issue is making the materials. The biological scale up still remains a challenge for both gene and cell therapy. And scale-ability is a very expensive endeavor.

I’m not surprised when somebody says, it’s going to cost me $100 million dollars to make a facility. And you know, that’s plus or minus $50 million in any scenario.

BJ: And where does that capital come from?

SC: Its coming from small companies getting initial data to suggest that it works, and then partnering that data with organizations that are capable of financing it. So, it may be through public private partnerships. And certainly, the going public scenario. Many of these companies have been built around the idea of going public. If they never got approval, I find it very interesting, they eventually put themselves up for sale and a larger pharma buys them out. So, those have been interesting because they never really got to commercial launch stage. And many times, it’s just because of the amount of capital required to get to that level.

BJ: I’m curious to learn a little bit about the accident at UPenn that slowed progress. Can you talk a little bit about what happened there?

SC: Well, that was a clinical trial, in the case of one patient which was a liver disease, a specific genetic disease. The viral delivery system caused a huge reaction in the patient and the patient died. It caused a lot of concerns by the FDA. If you look back, it was an overly harsh reaction, because for for many of us who were in the commercial area, it pretty much stopped our clinical trials and the development of some of our products.

And the field itself, for those initial companies, I think there were three or four of them that were either absorbed by pharma, and or eventually went out of business.

But the interesting thing is, many of the targets and diseases today that are showing progress were the original ones that we all were working on. So, I’m not surprised is that our old ideas of 30 years ago are still pretty damn good.

BJ: So, how much did this slow down development?

SC: Probably 10 to 12 years. I must credit academia for being persistent. The academic community was persistent, fighting their way through grants. And I think that was really a commendable thing, showing that the government funding of great ideas is still hugely important. Whereas the commercial guys couldn’t raise that kind of capital needed because their time frames are so short.

If you think about CAR-T, you think about people like Carl June. I mean, he had that idea with those chimeric antigen receptors, which came out of various other groups as well, including a commercial entity called Cell Genesys. Those were 25, 30 years ago. Those ideas are the basis and the industry today.

BJ: In terms of key sources of capital for emerging growth companies, where do you find the sources of capital?

SC: I think the capital that we have now is the ability to have a public offering, that certainly is very, very helpful. I think the other area that was not available to those early on, is the angels, high net worth angels. And then, I guess the family offices have exploded in terms of ability to invest in this area, and then the disease foundation. So really, three or four extra buckets of money that we’ve never seen before, from 30 years ago. The SBIR program for the government was very nascent. That’s been successful to help people bootstrap companies. So, that was a source of money that wasn’t available. Other than the NSF straight, NIH type of funding, and that was mostly for academics.

Clearly, high net worth angels were not a routine scenario. The other scenario of these family offices, i.e. high net worth individuals who pull their money together for some family, flexibility, those weren’t necessarily available. It really is a different environment. And the IPO market was very, very tough in the 90’s. Now, some of that has certainly opened up and consequently, probably too many public companies to keep the whole thing sustainable.

BJ: How many companies are public right now?

SC:Probably well into the thousands, I think that’s the number I’ve heard, but I have not sat down and looked at all the listings and counted them all. But there’s a lot of public companies, and the issue is then becoming the ability to analyze what they have, versus somebody else.

Thus the importance of research coverage of these companies and having individuals who can analyze the pipeline, the commercial opportunity, and the clinical scenario is very, very important. So, while the big banks, the Morgan Stanley’s, JP Morgan, and Goldman Sachs, they can cover the big companies, there is simply not enough analysts out there to cover all the companies. And some of these companies are hidden treasure, and you just must find them.

BJ: These are public companies or mostly private?

SC: Both public and private, the private, even worse, there’s no real good way to cover private. Other than the hype of a PR machine that’s been paid for.

BJ: Do these companies want visibility?

SC: I think all the genuine companies want visibility. They want to show that they are progressing. It’s easy when you have a product, you’re selling things on the market on an open market, and there’s revenues being generated. That is a very easy way to analyze a company.

The bigger challenge is when there are no revenues, and only promises. And then how big is the promise? I guess it’s just really a story and how long it takes to get from one inflection point to another inflection point. And how big is that reward at the end?

BJ: What advice would you have for family offices or high net worth individuals, who are passionate about the notion of cures for cancer, but don’t have that sort of scientific knowledge and expertise?

SC: I think part of it is talking to the technology developers themselves. That’s important. Credibility, and true scientific publications. The third thing is external advisors, as well as groups who have been set up to do that kind of thing, such as OneMedMarket.

If you’re primarily interested in long term streams of income, a consistent stream, then investing in this area is probably not a good idea because none of these pay any kind of dividends at all. On the other hand, if you’re looking for a high risk, high return scenario, then investment in this type of area is very viable.

BJ: Tell us in layman’s term, what are the differences between gene therapy and cell therapy?

SC: Gene therapy is taking external DNA, or are even cases of RNA and putting it in a system called a vector. So, it’s a different package, and then throwing that directly into people and having that gene reside in the person that is doing its thing. Cell therapy is taking specific cells outside the body, modifying those cells and putting them back.

BJ: Can you talk a little bit about some of the interesting projects you have been working on recently, specifically Orpheus?

SC: Orpheus is the next generation oncology project, so we’re talking about the CAR-T space. And that’s all first generation. I’m interested in a second and third generation now. We’re advanced immune engagers. And so we’ve been working on bi-specific, tri-specific, immune engagers.

We’ve done that true licensing play as well as early clinical development, then they’ll go through our own collaboration with a larger partner. It’s kind of fun, we’re under the radar, which is kind of on purpose. Our feeling is that we can make a big dent because we have have no distractions and pressure.

Definitions:

CAR T-cell therapy is a form of immunotherapy that uses specially altered T cells — a part of the immune system — to fight cancer. A sample of a patient’s T cells are collected from the blood, then modified to produce special structures called chimeric antigen receptors (CARs) on their surface.