Weathering the Storm in CGT: How can we swim to shore?

Emmanuel Grillot, Co-Founder and Managing Director at Altius Bioventures, believes that early-stage investors will play a crucial role in advancing cell and gene therapies (CGT) to commercial viability. He emphasizes that the industry's current struggle to meet market demand can be addressed through non-therapeutic, next-generation innovations in production, analytics and distribution. This post is one of a collection of posts covering this topic as part of Signal's eighth blog carnival where you can find other posts on this topic.

An early surge of investor enthusiasm, followed by the impact of an economic crisis, has left our field navigating through troubled waters. After record-breaking investments in 2020 and 2021, the cell and gene therapy industry is now undergoing a natural correction, with investment levels returning to pre-pandemic norms. Recently, the sector has faced challenges due to early-stage companies going public prematurely without demonstrating market access robustness and commercial viability, coupled with negative clinical results, particularly in allogeneic cell therapies and autologous CAR T therapies targeting solid tumours. These factors have led to increased caution regarding risky, early-stage investments in the sector, affecting the flow of capital.

Additionally, Big Pharma is streamlining early cell therapy work due to manufacturing and commercial challenges. Broad issues affecting scalability and affordability include reliance on manual processes and specialist expertise, production inefficiency, poor capital allocation, lack of automation and integration, process complexity, and high cost of manufacturing and logistics. Progress with cell therapies for solid tumours has been slow, as the technology wasn’t ready when treatments rushed into clinics. Moreover, while “off-the-shelf” allogeneic cell therapies may address many of these challenges and replace autologous cell therapies, these products have faced strong clinical headwinds.

Though raising venture money is more challenging today compared to the past two years, the industry continues to show exciting developments. The cell and gene therapy sector is expected to dominate as the industry trend with the greatest impact on the pharmaceutical industry in 2024 (Global Data’s The State of the Biopharmaceutical Industry 2024 report). This growth is driving unprecedented non-venture investment and deal-making when considered over a broader time frame, fueled by an expanding clinical pipeline, more FDA-approved drugs and a rapidly evolving landscape, bringing new hopes to patients with life-threatening diseases. For example, CARVYKTI®, a CAR T therapy for multiple myeloma, has demonstrated unmatched efficacy, with over 90 per cent of patients achieving a complete response. However, despite these breakthroughs, the first-generation CAR T products have reached less than 20 per cent of the eligible patient population, leading to patients dying on the waitlist, highlighting the significant global challenge of ensuring that approved cell therapies are both affordable and accessible to a broader patient population.

Given the industry's unique challenges—such as personalization and low market penetration—early-stage investments in technologies and tools that can predict or optimize therapeutic efficacy, speed up production, streamline post-manufacturing processes, and enhance overall efficiency represent significant near-term opportunities crucial for the industry's success. 

The industry's struggle to meet market demand is widely recognized, and next-generation innovations in production, analytics and distribution are viewed as essential to addressing these challenges. Existing technologies often fall short, limiting the early adoption and market penetration of commercial cell therapies due to high costs and lengthy production timelines. As a result, investors are increasingly focused on solutions that address these needs, with a strong consensus that advancements like comprehensive digitization, automation, intelligent analytical tools, multi-product processing, and AI/ML could help the industry overcome these hurdles.

The fill and finish process is a prime example of a critical area where automation and advanced technology could have a substantial impact. Developing systems capable of handling varying volumes and ensuring accurate filling for both small and large-scale batches would be highly beneficial, particularly in allogeneic manufacturing where scalability is a significant challenge, with single batches often needing to be divided into 200 to 1000 vials.

Another prime example is illustrated by the growing demand for decentralized and adaptable solutions, particularly for more advanced, smaller-scale equipment and custom or pre-filled consumables that can streamline operations. Advancements in both areas are crucial for enhancing efficiency and better supporting decentralized manufacturing. Bridging these innovation gaps is essential for commercial scaling and represents a fantastic commercial opportunity for investors.

What’s next looking ahead?

Investors in cell and gene therapies are increasingly impacted by the tools, technology, analytics and services integral to product success and commercial models, more so than in other therapeutic modalities. A prudent investment thesis in cell therapies involves investing in both the therapeutics and the underlying innovations in tools, technology and services critical to their commercial success. This approach maximizes opportunities for value creation and helps to de-risk the investment portfolio.

Looking ahead to late 2024, there is cautious optimism for a rebound in funding, as expected decreases in federal funding rates and cooling inflation may create a more favourable investment climate. This could boost investment activity for cell and gene therapy companies that meet the stricter criteria set by well-informed private equity and venture capital investors. These investors are likely to focus on companies with well-defined programs, longer cash runways, demonstrated early-stage trial success, and alternative income sources, such as licensing and collaboration deals. Additionally, tech ventures that can demonstrate market access, reduce manual handling, and lower production costs through greater automation, integration and standardization across workflows will likely attract more interest. 

I anticipate that investors will remain highly selective, scrutinizing companies' data and pipelines to identify those truly delivering on their promises, bolstered by upcoming approvals and the increased market penetration of approved products, which provides reassurance.