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Sana Biotechnology (NASDAQ:SANA) is a relatively new introduction to public markets. Shortly after its IPO in early 2021, it peaked above $40 per share. Today, as I write, you could buy a share for $4.75. As long as the risks are understood, and the stock is held in a risk-balanced portfolio, I think Sana is a good stock to buy. This article will focus on the launching of Sana’s first trial in humans following the FDA recently granting permission for that. I will also look more generally at the promise of the Sana cell therapy platform before explaining why a company with a nearly $900 million market capitalization and no human clinical data so far is worth accumulating. First, a look at Q3 2023 results, mainly because the cash balance indicates how long the company has before it will need to raise more funds.
Sana Biotechnology’s Q3 2022 Results
Sana Biotechnology Q3 2022 results were reported on November 2, 2022. There was no revenue. Net loss was $85 million, largely due to R&D spending. EPS loss was $0.45. Cash and equivalents ended at $512 million, down $68 million in the quarter. If $85 million is used as the cash loss run rate, there were about six quarters of cash left at the end of Q3.
FDA Clearance for Phase I CAR T Therapy Trial
Moving from being a preclinical company to being a clinical-stage biotech is a very important milestone. Sana passed that threshold with SC291 for B-cell malignancies. It announced on January 26 that the FDA cleared its IND (investigational new drug) application for the first in humans, Phase 1 study of SC291 for patients with a variety of B-cell malignancies (blood cancers). SC291 is a CAR T (chimeric antigen receptor, T cell) targeting CD19, a well-characterized protein expressed by B cells. It would be differentiated from competitors by overcoming the immune system’s rejection of the donor’s T cells. That could result in the CAR T cell therapy persisting longer and leading to more durable, complete responses. It was created with a hypoimmune platform designed to disrupt major histocompatibility, or MHC, class I and class II expression. That would hide the active cells from the adaptive immune system.
If SC291 works, then the platform will likely become a basis for cloaked CAR T cells engineered to attack other targets. Initial data from the Phase 1 SC291 study should be available sometime in late 2023.
Sana Prioritizes its Program
Earlier in 2022 Sana had announced it would move its manufacturing plant from Fremont, CA to Bothell, WA (near Seattle), resulting in approximately $100 million in expected cost savings over the next three years. On November 29, 2022, Sana said it would prioritize its portfolio. There would also be a 15% headcount reduction and the pausing or cancellation of at least one preclinical program. While no specific dollar number was given for savings, I would guess the cash burn rate might be reduced to $50 to $60 million per quarter, at least until larger, Phase 2 programs are initiated. So cash would be sufficient to last 8 to 10 quarters, or into 2025.
In addition to the SC291 program, which is now cleared for a Phase 1 trial, six other programs were highlighted for continued development. The one program named as cancelled was SC187 for heart failure. Those to be continued start with SC263 (HIP-modified, CD22-targeted allogeneic CAR T) with Sana expecting to file an IND in 2023. Over 50% of patients treated with approved autologous CD19-targeted CAR T cell products currently on the market either relapse after a complete response or never reach a complete response. CD22, which is also a B cell surface protein, has emerged as a target to address patients that fail to achieve durable complete responses with a CD19-directed CAR T therapy. A CD22-directed CAR construct led to a complete response in over 50% of treated CD19-failure patients. SC263 incorporates this clinically-validated CAR with T cells manufactured using Sana’s HIP platform. It has the potential to treat patients with B cell malignancies who have failed previous CAR T therapies.
SG295 (in vivo CAR T with CD8-targeted fusogen delivery of a CD19-targeted CAR) is also on track for filing of an IND in 2023. This program aims to generate CAR T cells in vivo (inside the patient), eliminating the need for conditioning chemotherapy and complex CAR T cell manufacturing. The company expects to study this therapy in patients with B cell malignancies. Generating CAR T cells in patients would be a giant step forward.
SC451 (HIP-modified, stem-cell derived pancreatic islet cell therapy for patients with type 1 diabetes) goes beyond the CAR T cancer paradigm. Sana remains on track to file an IND in 2024. Preclinical data has highlighted the potential for HIP modifications to allow these cells to evade both allogeneic and autoimmune rejection in type 1 diabetes. The therapy would transplant hypoimmune islet cells with no immunosuppression into patients with type 1 diabetes. These cells could produce insulin in a physiologic manner in response to glucose, effectively curing the disease.
SC255 (HIP-modified, BCMA-targeted allogeneic CAR T) would be aimed at treating multiple myeloma. An IND could be submitted in 2024. BCMA has been validated as a target for autologous CAR T therapy in relapsed and/or refractory multiple myeloma. Also manufactured using Sana’s HIP platform, it could offer greater persistence of CAR T cells for patients with multiple myeloma.
On a longer timescale, with more preclinical study ahead, is SC379 (stem-cell derived GPCs). The glial progenitor cell program aims to deliver healthy allogeneic GPCs, the precursors to both astrocytes and oligodendrocytes. It could treat myelin and glial-based disorders, which represent a broad group of debilitating neurological disorders, including progressive multiple sclerosis. The timeline is for toxicology studies to begin in 2023.
Finally, Sana is developing a hematopoietic stem cell or HSC-targeted fusosome with the ability to deliver gene editing material in vivo to repair genetic abnormalities such as those that cause sickle cell disease and beta-thalassemia. The SG418 Fusogen HSC program anticipates preclinical proof of concept in 2023.
Sana’s Cell Therapy Platform
As indicated by the specific clinical and preclinical programs described above, Sana has a powerful set of platforms for innovative cell therapies. These extend the CAR T capabilities and other cell therapies that are now in more general development. The HIP platform generates hypoimmune cells, so that cells from a donor can be engineered for therapeutic effectiveness and then given to a patient without rejection by the immune system. HIP engineered cells can evade both the adaptive and innate immune systems. If you are thinking of investing it is worth watching the short (1-minute) HIP video at the company website.
Gene therapy is much talked about, but still in an early stage of development, with many issues to be overcome. Sana’s Fusogen system uses natural cell-targeting proteins that are engineered to fuse into specific cell types. They can deliver a variety of payloads including proteins, DNA, or RNA.
Note on Competition
While Sana is just entering its first clinical trial with a cell therapy, the overall field has already proven itself. Several CAR T therapies are currently generating significant commercial revenue. But there is also competition from other therapy types. There are many therapies available for B cell malignancies, for example. Despite that, there is still considerable unmet medical need. Providing a better CAR T or other cell therapy would be welcomed in the marketplace. The financial potential is illustrated by CAR T therapies already in the market. Since I own Gilead Sciences (GILD) stock, I will use Yescarta as an example. Yescarta was developed by Kite Pharma, which was acquired by Gilead. It has been approved by the FDA for diffuse large B-cell lymphoma, transformed follicular lymphoma, and primary mediastinal B-cell lymphoma, when patients have failed conventional treatment. It has a slightly different set of approvals in the EU. In Q4 2022 Yescarta revenue was $337 million, up 85% y/y. See also a Table of Approved CAR T Therapies. Also note there are other companies developing cell therapies for diabetes.
Analysis and Valuation
All we can conclude at this point is that Sana Biotechnology might have what will become improved therapies for a variety of disease conditions. Valuation is a problem. One could estimate how big the CAR T and cell therapies market will be in, say, 2030. We know failures can occur in Phase 1, Phase 2, and Phase 3 clinical trials, and even an FDA-approved therapy may generate little revenue, or much less than analyst estimates. Choose a risk of failure and a revenue target if there is success and anyone can come up with a valuation. The reality is statistical: Sana could be worth nothing in 2030, or it could be worth tens of billions.
A better way to approach valuation is to look at the details of the biology involved and then… guess. My guess is that if HIP does not work the first time, the platform itself can be reengineered to work. That would take time and money, but we know one thing: CAR T therapies can work, and they can generate significant revenue and profit flows. We also know that SANA closed on February 7 at $4.76, giving it a market cap near $896 million. After its IPO it jumped to over $40 per share. So other investors are discouraged. But the platform has delivered several potential therapies that should go into clinical trials in 2023 or 2024. Since these are for deadly cancers with short life expectancies for patients, initial data will come out relatively quickly, likely starting in Q4 2023, with much more data in 2024. If that data is positive, even though it is only Phase 1 data, investors will get excited again. I like the technology, and I invested in Juno Therapeutics back before it was bought by Bristol Myers (BMY), which I also owned. So I think this is a good time to accumulate Sana, as long as the downside risk is understood. I think the upside opportunity greatly exceeds the downside risk, at least until we see the first Phase 1 data.
Finally, if clinical trial data is positive, Sana could partner with a larger company like Bristol Myers or Gilead. That would likely provide cash milestone payments, extending the cash runway. Any partnering should also boost the stock price. I think that would be in 2024 at the earliest.
