Three months after nabbing Kite Pharma Inc. for $11.9 billion, Gilead Sciences Inc. fine-tuned its cell therapy strategy with the structured acquisition of privately held Cell Design Labs Inc. Formed in 2015 and launched early last year, the Emeryville, Calif.-based company has focused on reengineering the molecular machinery of human cells – specifically, to fight cancer.

The buyout, which includes the 12.2 percent of Cell Design's shares held by Kite, was valued at up to $567 million. That's a handsome return on the $34.4 million placed by the company's investors, which also include Kleiner Perkins; Osage Ventures; Mission Bay Ventures; Brian Atwood, Cell Design's co-founder, president and CEO; Arie Belldegrun, Kite's founder and a member of Cell Design's board; and other unnamed individuals.

Gilead said the agreement includes an up-front payment of approximately $175 million, subject to certain adjustments, and additional payments of up to $322 million to Cell Design shareholders based on development and approval milestones. The acquisition is expected to close "shortly."

Coming on the eve of the American Society of Hematology annual meeting in Atlanta, the Cell Design bolt-on seemed to confirm the prediction of John Milligan, Gilead's president and CEO, who declared in August that the company's acquisition of Kite Pharma Inc. was "a pivot to cellular therapy as our main strategy going forward," and promised, "we're not going quiet after this deal." (See BioWorld, Aug. 29, 2017.)

Cell Design's existing partnership with Kite, in fact, was the driver of Gilead's pick-up.

"We started this company with the idea that this technology is useful in so many different directions that we would never be able, as a little company, to develop it completely ourselves," Atwood told BioWorld. "We were always going to be interested in partnerships."

The Kite team was well acquainted with Cell Design's scientific founder Wendell Lim, professor and chairman of the department of cellular and molecular pharmacology at the University of California San Francisco and an investigator of the Howard Hughes Medical Institute, and keenly interested in both his lab work and patented inventions, Atwood recalled.

Partnering discussions with Kite were well underway when Atwood, co-founder and managing director at Versant Ventures and former founder, president and CEO of Glycomed Inc., joined the Lab Design startup team. The research collaboration and licensing agreement with Kite, signed in May 2016, covered the development of precision-controlled chimeric antigen receptor (CAR) candidates incorporating Cell Design's molecular "on/off switch" technology, known as its Throttle Switch, directed to certain targets for the treatment of acute myeloid leukemia, or AML. The deal, disclosed the same day and in conjunction with the company's operational financing round, included an option to work on therapies for CD19-related malignancies.

"We got that relationship going, and we've made good progress," Atwood said, suggesting 2019 as a likely time frame to move the Kite-partnered technology into the clinic.

Over past 18 months, the Kite and Cell Design teams enjoyed an increasingly close and productive relationship. Once Kite closed its deal with Gilead, "they told the Gilead folks to take a good close look at us," Atwood said.

'GILD is moving to consolidate technologies'

The Throttle Switch technology, used to turn CAR T cells on and off, relies on splitting a standard CAR T molecule construct into two inactive molecular components and then cloning those into a patient's T cell, resulting in the CAR T cell existing in an "off" state. In the presence of a small-molecule drug, the two components come together to close the switch and activate, seeking out and eliminating cancer cells.

Preclinically, Lim has shown that the technology has the ability not only to turn CAR Ts on and off "but actually to turn them up and down, like a volume knob," Atwood explained. "The technology is really pretty useful."

Cell Design's companion technology, Synnotch, is even more nimble. Synnotch enables the reengineering of external and internal portions of the naturally occurring Notch receptor and then engineering those constructs into an individual's immune cells, where they can instruct the T cells to detect new molecular targets and to turn on new genes.

Additional modifications of the Synnotch scaffold can enable a range of sensing and response behaviors. Synnotch receptors can be expressed in T cells, for instance, to create a programmable immune cell that binds to a cancer cell and triggers specific molecular activities: locally modulating tumor defense mechanisms, delivering drugs such as checkpoint inhibitors, inducing a customized cytokine profile to supercharge the immune system or encouraging T cells to differentiate into specific subtypes to convey long-term protection against cancer recurrence.

The technology "gives a lot more autonomy to the engineering of a specific cell – in this case, a T cell – in its environment," Atwood said. "We're talking about having much more significant control over transcription in the nucleus. In the near term, that translates into the ability to direct a T cell to recognize a sequence of targets instead of just one target."

Such optionality takes Synnotch well beyond the approved CAR T therapies, Yescarta (axicabtagene ciloleucel, previously KTE-C19, Gilead/Kite) and Kymriah (tisagenlecleucel, previously CTL-019, Novartis AG), which find CD19 "but then more or less blow up, like a first-generation cruise missile," Atwood said. (See BioWorld, Sept. 5, 2017, and Oct. 20, 2017.)

He likened Synnotch's ability to recognize two targets as the pairing of a zip code and street address.

"You can get to a certain location in the body and then actually localize in on a cancer cell," providing greater accuracy to destroy the target, Atwood explained.

Cell Design's technologies likely have applications in other indications, "but we're focused and this acquisition is really focused on cancer," he added.

Analysts liked the deal. Although relatively small and "not a huge surprise" given Kite's relationship with Cell Design, the transaction "shows how GILD is moving to consolidate technologies that are important to building a potential best-in-class cell therapy business and thus is committed to investing here over the next few years," Jefferies Group LLC analyst Michael Yee wrote in a flash note. "Investors should expect (and we predict) that GILD will look to integrate 'gene editing' either through partnership or acquisition as a next likely piece needed, as well, which could fine-tune and control the T cells from all angles."

As examples, Yee cited the ability to knock out PD-1 or CTLA-4 to enhance efficacy or a strategy similar to that of Cellectis SA "to knock out key signals that cause the body to see the CAR Ts as foreign."

"While we are not surprised by the continued focus on this area, this is an encouraging signal for a relatively small investment in light of the Kite investment," added UBS Securities LLC analyst Carter Gould in a note.

Alluding to the speed of the transaction, Atwood said the companies are still hammering out operational details but he gave an "emphatic yes" to Gilead's desire to keep Cell Design's 54 employees and not just its multiple patents and platforms.

"In a way, this transaction is ideal," he said. "We started off with a partner who liked us from the beginning. Now we've got another partner who is significantly more capable and can help us make this technology go in as many different directions as we think it should. This is a great new chapter for Cell Design Labs and its researchers to expand the use of this technology in the treatment of cancer."

On Friday, Gilead's shares (NASDAQ:GILD) gained $1.50 to close at $74.22.