Description

Adicet  Bio (ACET)

Long Equity

Adicet (ACET) is a negative enterprise value biotech progressing an allogenic (“off the shelf”) CD20 gamma delta CAR-T cell therapy in autoimmune with lupus nephritis as the first disease of interest.  ACET is also enrolling additional gamma delta CAR-T programs including an allo hematological oncology trial targeting CD20, a CD70 allo CAR-T entering the clinic in Renal Cell Carcinoma (RCC), and a third allo program targeting GPC3 which is licensed to Regeneron for treatment of hepatocellular carcinoma (HCC).  ACET has several value inflection data points across the pipeline reading out from the back end of 2024 into mid-2025.  In our view the autoimmune program is the biggest catalyst for value creation.  We expect a significant re-rating of the stock if the company can generate proof of concept data.  ACET trades at a negative $135M enterprise value with a mkt cap of $110M, cash of $248M, and spends approximately $25M per quarter.  ACET equity is significantly mispriced compared to peers.

Background on cell therapy and its recent application in autoimmune

Since Georg Schett’s seminal clinical research publication in Nature Medicine in September 2022 which demonstrated SLE cures, cell therapy companies have pivoted writ large to testing their existing oncology cell therapy products in autoimmune diseases.  Schett used an autologous CD19 CAR-T (similar to Kymriah or Yescarta) in systemic lupus erythematosus (SLE) with 5 out of 5 patients achieving durable treatment free remission.  Schett’s data has continued to improve with 8 out of 8 SLE patients in durable remission after 18 months of median follow up as of EULAR in June 2024. Efficacy was also demonstrated in 4 systemic sclerosis SSc patients and 3 IMM patients (Schett EULAR 24).  The use of cell therapy products for treating autoimmune diseases appears to have a bright future. 

Autologous cell therapies have had success in hematological oncology, including B Cell lymphomas with CD19 targeted Yescarta and Kymriah as well as Multiple Myeloma with BCMA targeting therapies Abecma and Carvykti.  Autologous cell therapy requires the patient to be their own cell donor and go through the process of apheresis (cell collection) after which the material is processed by cell therapy manufacturers over a couple weeks to engineer the CAR addition and other genetic edits. After manufacture, the final cell therapy product is shipped back to the academic center/hospital where it is infused into the cancer patient.  The results range from good to curative.  Given the cumbersome, time consuming and invasive process of autologous CAR-T, cell therapy developers have been trying for over a decade to create efficacious allogenic (off the shelf) cell therapy products that are produced in advance with donor plasma/cells not requiring patient apheresis and can be used on demand. 

To date the allogenic cell therapy outcomes in oncology have fallen short from a durability standpoint though it’s possible improvements of additional genetic edits or lymphodepletion regiments will achieve success and approval.  Following Schett’s data in SLE, there has been a hypothesis that allogenic cell therapies could be curative in autoimmune where they struggled in oncology because the longer persistence assumed required in oncology (the time the therapy is active before one’s immune system eradicates it) may not be needed when used for autoimmune diseases.  We will not know this answer without the data, however the first allogenic data point we are aware of came this week and showed deep B cell depletion and disease improvement. (Allo CD19 Cell) 

ADI-001

Adicet was one of the first cell therapy companies to have its IND cleared for autoimmune, specifically for lupus nephritis (later stage SLE), and will begin dosing this quarter.  

Adicet’s lead program ADI-001 is an “off the shelf” allogenic CD20 gamma delta CAR-T.  A few attributes make it unique. Most CARs have targeted CD19 to date where this CAR targets CD20.  ACET also uses gamma delta T cells whereas most other CAR products use alpha beta T cells.  ADI-001 has already been tested in over 24, B-cell lymphoma patients demonstrating good safety (low rates of CRS and ICANS) vs. comparable CAR-Ts. 

The concept in autoimmune disease is to completely wipe out B cells and have your immune system reset to normal where it no longer produces the autoantibodies that attack your own cells. Theoretically, the same therapy could apply to several autoimmune indications including lupus nephritis, SLE, MS, rheumatoid arthritis, myasthenia gravis, idiopathic inflammatory myositis and ANCA vasculitis. 

Adicet had its IND cleared for lupus nephritis in December 2023 and the first patient in the trial should be dosed this quarter.  Initial data on the programs is due before or during Q1 2025.  ACET is likely to announce their desire to use ADI-001 for treating additional autoimmune indications and we expect to hear more about this on the next earnings call. Below is a graphic depicting phase 1 trial design:

Market for LN

US prevalence for lupus nephritis is approximately 150K patients and there is no great standard of care.  Today lupus is primarily treated with a regiment of steroids and mycophenolate mofetil (MMF) or cyclophosphamide (chemo).  A few newer agents have been approved in the last few years that add marginal efficacy including LUPKYNIS  and Benlysta. LUPKYNIS, which provides marginal benefits costs $100K per year for many years and is not curative.  Compare this to cell therapies which cost approximately $500K (Kymriah/ Yescarta/ Caryvkti/ Abecama). We believe pricing for a “one and done” curative autoimmune treatment may be similar to oncology pricing. LN  would represent a blockbuster category  and potentially a starting point for additional autoimmune indications.

Competitive landscape

As noted in the introduction, there has been a rush into autoimmune diseases by cell therapy companies (and more recently bi-specific antibody players as well).  While it remains too early to call winners and losers, the current valuation discrepancies are large and ACET remains the cheapest player in the category despite having a meaningful lead.  The most advanced CAR T developers include Cabaletta (CABA) who engaged Georg Schett as their primary researcher/advisor and released 2 patients of data at EULAR, Kyverna (KYTX) which raised $366M in its 2024 IPO and announced a mixed 7 patient data set at EULAR, and Cartesian (RNAC) which announced a mixed 36 patient data set in myasthenia gravis earlier this month.  The comparison table below highlights the valuation discrepancy while the slide below from a Piper Sandler report provides additional comparisons and upcoming catalysts. 

Additional Pipeline value drivers- oncology

ADI-001 in Mantle Cell Lymphoma (MCL)

While investors are not ascribing significant value to allogeneic cell therapy for use in oncology, the scientific community has not given up with many ongoing proof of concept trials still push forward in the clinic.  A substantial commercial market has already been established with autologous CAR-T generating ~$1.5B per year in lymphoma revenue and ~$1B per year in multiple myeloma revenue with expectations to grow several fold.  

ADI-001 was initially tested in Non-Hodgkins Lymphoma (NHL).  In 24 late-line (median 4 prior lines) patients, ADI-001produced a 71% overall response rate (ORR) and 63% complete response (CR) rate with a 25% 6-month CR rate for mostly LBCL patients and some mantle cell lymphoma MCL patients.  The 6-month CR rate is typically used as a proxy for a cure and is 25% not likely good enough for approval or commercial success.  ADI-001’s trial is currently expanding the MCL cohort where this patient subset performed best. By year end 2024 we will have 6 month CR rates on a larger population of MCL patients which should determine a possible future for ADI-001 in oncology.

ADI-270 in RCC

For oncology we are more excited about CD 70 targeted, ADI-270 in oncology vs ADI-001 for oncology.  To date CAR-T therapy has not shown great efficacy in solid tumor indications but gamma delta CAR-T may change that paradigm.  Gamma delta T cells are much less numerous than alpha beta T cells in the body, however they are very organ tropic, meaning gamma delta T cells traffic more directly to the tissue of interest, which would be the kidneys in this case.   The ADI-270 IND was recently cleared, and we expect early dose escalation data in Q1 ‘25. 

ADI-002 in HCC (licensed to Regeneron)

Regeneron exercised its option to license worldwide rights to ADI-002 in January 2022 based on its initial 2016 licensing agreement. REGN completely funds the program and ACET is entitled to high single digit royalties.  The program is not yet in the clinic and disclosure is limited but ACET CEO Chen Schorr indicated that REGN is actively progressing the therapy as of the June 2024 Jefferies conference.

Conclusion

ACET is at the forefront of cell therapy in both autoimmune disease as well as oncology and trades at a negative enterprise value where comparable companies that are further behind have meaningful valuations.  ACET is also the leader in using gamma delta T-Cells.  While early in its clinical lifecycle, cell therapy appears to have extraordinary efficacy in autoimmune diseases, addressing very large markets. The company could double its stock price and still trade below the cash on balance sheet and there are meaningful data catalysts in the short to medium term which will close the valuation difference.  

Catalyst

• First patient enrolled in lupus nephritis using ADI-001
• First clinical data in lupus nephritis Q4 24 or Q1 25
• Clinical data in additional autoimmune indications in H1 25
• Clinical update on ADI-001 in MCL expansion cohort and path forward in hematological oncology Q4 24
• First clinical data in RCC using ADI-270