blue expects to treat its first patient with bb2121 by early 2016. two and a half years ago. At the time the field of engineered T cells was in its infancy

COWEN: $BLUE Moving On In T Cell Therapies Without
Celgene $CELG - divorce terms: bluebird bio and Celgene announced the end to an exclusive collaboration in T cellbased
immunotherapies with the parties retaining joint rights to lead candidate
bb2121, an anti-BCMA CAR therapy. BLUE will receive $25MM and the freedom to
pursue its own strategy across a pipeline of other candidates. We view dissolution of
the partnership as a positive development for both parties.
Breaking Up Is Hard To Do
Whether a break up is personal or corporate, it is natural for outside observers to
ask “what when wrong?” and “which party is worse off for the split?”. In the case of
bluebird/Celgene, we believe it might be more accurate to ask “what went right?” and
“which party is the better off for the split?”.
Recall that the companies signed an exclusive collaboration two and a half years
ago. At the time the field of engineered T cells was in its infancy, bluebird was private
(along with KITE, JUNO, etc), just a handful of patients had been treated with CD19
CARs, and a role for technologies like TCR engineering, genome editing, antigen
identification was not well appreciated. As was their goal at the time, the teams at
bluebird bio and Celgene succeeded in bringing a novel CAR targeting BCMA to
the cusp of clinical development within three years. The collaboration almost surely
benefited both bluebird and Celgene in terms of advancing platform capabilities (e.g.
construct selection, gene therapy transduction, cell expansion/processing, etc.) that
are required to compete in this field. We assume that much of this would not have
occurred without Celgene’s early financial commitments (the deal included a $75MM
upfront payment to BLUE).
Today the engineered T cell landscape is very different. Proof-of-concept data has
been generated across multiple antigens, many more players have entered the field,
and multiple additional technologies appear to have a role to play. Optimal T cell
therapies are likely to be created through highly collaborative networks (AMGN/
KITE for example). As such it would seem increasingly difficult for two ambitious
companies to retain their exclusivity to one another. In Celgene's case, it may benefit
from greater flexibility, and possibly the opportunity to acquire outright a larger CAR
or TCR franchise. In bluebird bio's case the company is far larger, more mature,
and better resourced than it was, and is likely looking forward to maintaining 100%
ownership of future pipeline candidates.
Divorce Terms
Per the terms of the amended collaboration agreement bluebird will receive a $25MM
payment to develop bb2121, a CAR directed against the B-cell maturation antigen
(BCMA). BLUE will be responsible for development of bb2121 through Phase I trials
and any next-generation anti-BCMA candidates through the completion of Phase I

studies. Celgene has an option to develop and commercialize each BCMA product
candidate on a product-by-product basis while bluebird has the option to share
equally in the development, promotion and profits of any BCMA product candidate in
the U.S. Celgene will pay bluebird development and regulatory milestone payments
as well as royalty payments on net sales (as per prior agreement). bluebird retains
sole rights to all other CAR programs developed by bluebird under the Celgene
collaboration, including undisclosed programs in solid and liquid tumors.
Joint Custody Of bb2121 Granted
The lead candidate to emerge from the collaboration is bb2121, a lentiviral construct
carrying an anti-BCMA scFV and a 4-1BB co-stimulatory domain. The construct
utilizes the same promoter that bluebird is using in its Lenti-D vector in the CCALD
trial. BCMA is expressed on the surface of plasma cells and some mature B cells.
BCMA was selected as a target based on the specificity of its expression: BCMA RNA
is nearly universally detected in multiple myeloma cells and BCMA protein is found
on the surface of healthy and malignant plasma cells. Management believes it to be a
better target than CS1 or CD38 and expects its high specificity of expression will limit
off-tissue effects. In tissue culture, bb2121 T cells showed a superior tumor cell killing
profile versus other in-house BCMA CAR candidates. Preclinical data show mice
deficient in BCMA are healthy but have reduced survival of plasma cells. Furthermore
in mice with BCMA+ MM tumors, a single dose of bb2121 cleared the tumors and
resulted in 100% survival as compared to mice treated with control CAR T or mice
subjected to repeated dosing (4 weeks) with Velcade which delayed tumor growth
and did not lead to long-term survival. Further analysis with immunohistochemistry
staining showed that in control mice, the BCMA+ MM tumor expanded with no
CD3+ infiltrate while in bb2121 treated mice, the BCMA+ MM tumor regressed
with CD3+ CAR T cells infiltrating and replacing the tumor. bluebird noted a few
differences compared to another BCMA CAR construct being tested in an ongoing
NCI clinical trial. bb2121 encodes a 4-1BB co-stimulatory domain rather than NCI's
construct which encodes for CD28. Furthermore, bluebird is utilizing its lentiviral
delivery approach versus NCI's gamma-retrovirus approach. The company expects to
treat its first patient with bb2121 by early 2016.