Astellas Pharma Inc.’s early 2018 buyout of Universal Cells Inc. (UC) may have laid the groundwork for longer-range steps in allogeneic CAR T-cell therapy, but Xyphos Biosciences Inc. CEO James Knighton told BioWorld Asia that the buyout of his firm provides the Tokyo-based giant for now with “an incredibly elegant solution that has tremendous potential.”

Contributing $120 million up front, Astellas could pay as much as $665 million if development milestones are reached in the arrangement, which brings aboard Xyphos’ ACCEL (Advanced Cellular Control through Engineered Ligands). The subsequent money is “not based on commercial success, but if [the technology] works they’re not going to have to worry about it,” Knighton said.

ACCEL allows for directing cells of the immune system to target single tumor antigens or more than one while controlling their proliferation and endurance, with molecules that can be delivered to natural immune cells or to engineered CAR cells. It’s based on an engineered modification to a natural human receptor dubbed NKG2D, which turns up on natural killer cells as well as some T cells. As modified, NKG2D is inert and unable to bind to any of its natural ligands, which manifest on stressed cells.

Through further protein engineering, several natural ligands of NKG2D have been tweaked so that they bind exclusively to the otherwise inert NKG2D receptor. Various functional molecules – such as antibodies that recognize specific tumor antigens – are attached to the modified ligand. Those bind exclusively to immune cells expressing the inert CAR on their surface, i.e., what Xyphos has dubbed convertibleCAR T cells. They can be directed by the ligand-bound antibody to seek and attack a specific cancer cell.

Knighton noted that “a lot of people have worked on” NKG2D, but not Xyphos’ way. The company makes CARs “just like everybody else is doing,” except for the inert NKG2D piece, around which its intellectual property is built. “With conventional CAR therapy – Gilead, Novartis and now BMS/Celgene –  you have to start all over with a brand new CAR” if the old one isn’t working, he said. “You don’t with us, because the CAR doesn’t change. You don’t have to go through that massive process,” since every CAR is the same. “All you have to do to retarget that CAR is put a new modified antibody on it.”

The hypothesis is approaching a major test in 2021, when Xyphos’ first convertibleCAR T-cell candidate is expected to undergo its first-in-human study. “Maybe Astellas, once they get in here and start doing stuff, can speed that up,” Knighton said, but much preclinical work remains to be done. He called 2021 “a good conservative date.”

Xyphos will “go after liquid tumors first, because there’s still an incredible need out there to solve this [tumor] escape issue,” Knighton said. The firm, as a wholly owned subsidiary of Astellas, will take aim at leukemia and lymphomas via “the usual suspects” – CD19, CD20, CD22 and others. But “the real promise here” could involve using CAR therapy against solid tumors. The method is versatile, he said. “We think we are going to be able to modify an IL-2 to bind to our CAR cells and give it a special targeting motif. That is the real holy grail here, but just significantly improving the current approach to CAR therapy in leukemia and lymphoma would be a game changer.” Astellas – which said the impact of the deal on financial results in the fiscal year ending March 31, 2020, will be “limited” – apparently agrees.

“We use the analogy that the first CAR Ts were the equivalent of the Model T in the automobile industry, absolutely revolutionary,” Knighton said, with a nod to the wall of photos of treated children at the University of Pennsylvania. “These kids are going to lead normal lives, and they’re going to do it because of this therapy. But, like every first-generation technology, we’re finding out the challenges with it.” That’s where Xyphos – which he likened to a Tesla – comes in.

Most employees staying

“The next generation is to [involve] allogeneic cells, so you can have an off-the-shelf CAR,” Knighton said. Astellas’ February 2018 takeover of Seattle-based UC gained the Universal Donor Cell technology to create cell therapy products that do not require human leukocyte antigen matching. “There are people who think [the allogeneic strategy] sounds good but autologous cells are still the best way to go. [They say] we’re just going to have to learn to bring the cost of manufacturing down.” He predicted “an interesting development from this point on, but the technology we’ve developed is a major step forward to solve some of the problems of that first generation.”

Knighton and the firm’s chief scientific officer, David Martin, formed Xyphos’ predecessor firm, Avid Biotics Inc., in 2005. “We were going after, at the time, a very targeted approach to antibacterial therapy, new types of precision antibiotics,” he said, and found a way to target “any bacterium we wanted, but it would touch nothing else.” Martin and Kyle Landgraf (now a member of Xyphos’ scientific advisory board) “started to play around with binding mechanisms” and ended up working with NKG2D, an effort that proceeded “in fits and starts” from around 2011. “In 2015 or so, we started to go out to talk to partners with both an antibacterial approach and immuno-oncology [I-O] activity,” touting a company that then was “almost a mini-conglomerate. We really struggled, from a business standpoint,” since most would-be collaborators only wanted to discuss the I-O prospects. In late 2017, they split Avid into two concerns: Xyphos to advance I-O and Pylum Biosciences Inc. to push antibacterials. “That’s when we really started to get some footing,” he said. “It was a tale of two cities, and I think this [Astellas] transaction proves that we were right” to make the division. Others came to the takeover table, but “it became obvious early on that Astellas was a cut above, and we focused on them,” he said.

Antibacterials represent “technologically a very difficult problem,” Knighton noted. “The bugs are smart. You spend hundreds of millions of dollars developing a drug that the bugs make obsolete in record time,” which means few players want to take the risk. “Everybody’s fleeing that area.” Although some suggest that the I-O space, by contrast, is overcrowded, “I don’t think that’s true at all,” he said. “Until cancer is cured, I don’t know how people can say there’s too much I-O.”

Xyphos has only seven employees; even in the old Avid days, the staff didn’t exceed 15, Knighton said. “The idea that innovation takes a lot of brawn and hundreds of millions of dollars and hundreds of people is not true,” he said, pointing out also that “we don’t have any venture capital in the company and never have.” Money has come from friends and family, NIH grants, and small but helpful collaborations with the likes of Lexington, Mass.-based Cubist Pharmaceuticals Inc., acquired by Merck & Co. Inc., of Kenilworth, N.J., in late 2014. The deal had an equity valuation of $8.4 billion and included $1.1 billion in net debt and other considerations for a total transaction value of about $9.5 billion. Knighton will leave Xyphos as will Martin after a transition period – “this is not our first rodeo, as they say” – and Astellas will “bring in newer, younger blood. But all of the [other] employees are staying” in order to provide the expertise that has brought the company this far, he said.

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