This small-cap biotech is a sneaky game on next-gen drugs

There always seems to be a “next big thing” in drug development. Selecta Biosciences (SELB) is well placed to ride an emerging wave.

Industry titans are increasingly interested in an emerging therapeutic approach called immune tolerance. Investors may see it as the opposite of a vaccine. Instead of training the immune system to recognize and attack a specific molecular target, immune tolerance aims to persuade the immune system to allow certain misidentified threats to slip through its defenses.

Immune tolerance has the potential to treat autoimmune diseases, which are characterized by the body attacking its own cells by mistake. The therapeutic approach could also increase the safety and effectiveness of biological drugs such as enzymes and genetic drugs, which are easily mistaken for real threats of viral or bacterial infections.

As one of the only immune-tolerant drug developers with clinical data from human patients, Selecta Biosciences could be a sneaky investment opportunity – as long as management complies.

Why ‘Tregs’ have legs

The many applications of immune tolerance all go through the same type of immune cell called a regulatory T cell, or Treg. These specialized cells are at an important intersection of the immune system. When activated, they “turn off” immune responses to threats or healthy cells. When dormant, the immune system rallies the troops and goes on the attack.

Many start-ups are developing immuno-tolerance tools based on cell therapies. Some use modified Treg cells directly, while others use more familiar CAR-T cells designed to affect Treg cells in the body. Both approaches have the potential to treat inflammatory bowel disease, rheumatoid arthritis, type 1 diabetes, and other conditions. However, cell therapies are challenged by expensive and complex manufacturing, risky administration, and questions about treatment durability.

Single Treg Cell Therapy Kidney Transplant Treatment from Sangamo Therapeutics (SGMO) , has entered clinical trials. However, the titans of the industry are showing an increased interest in the field.

GentiBio signed an agreement with Bristol Myers Squibb (BMY) in August 2022, that could net the small business up to $1.9 billion in payouts. Novartis (NVS) invested in the start-up through its venture capital arm. Meanwhile, Gilead Sciences (BROWN) invested in an initial fundraising for Kyverna Therapeutics. Many more are living off venture capital as they progress to clinical trials in the years to come.

Can Selecta Biosciences lead the field?

So where does Selecta Biosciences fit in the competitive landscape? The company takes a unique approach to immune tolerance with a simple tool called ImmTOR.

The ImmTOR platform takes rapamycin, a common immunosuppressive drug, and packages it into nanoparticles, which are processed by the body’s lymphatic system. This is where Tregs are made. The approach allows for lower doses of rapamycin and with a much more targeted effect compared to the traditional use of rapamycin, most commonly for organ transplants.

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Selecta Biosciences wants to develop immune-tolerant drug candidates in autoimmune diseases, much like the peers listed above. But the simplicity and versatility of ImmTOR makes many other opportunities accessible.

For example, one of the biggest limitations of biologic drugs is the formation of anti-drug antibodies (ADA). Although many patients initially respond to a new treatment, the benefits diminish over time. This is because their immune system creates ADAs which neutralize the drug, rendering it ineffective. Immune tolerance—creating Tregs to the biologic drug so that ADAs never form—might represent the perfect solution.

This may be the first time you’ve heard of ADAs, but they present a major challenge. Humira is the world’s best-selling drug of all time and will generate sales for the year 2022 of at least $18 billion. The antibody drug is used to treat various autoimmune diseases. However, 70% of patients taking the drug develop ADA, and only 4% of those people will achieve long-term remission of symptoms.

It’s Humira. Now imagine all the drug candidates that failed clinical trials due to ADA formation.

Neutralizing antibodies also represent a significant challenge in gene therapy. Gene therapies are commonly delivered using viral vectors. A patient’s immune system often creates ADAs to viral shuttles, which are identified as a threat. This forces drug developers to use very high doses to ensure that enough of the therapeutic payload enters a patient’s cells, knowing that the rest will be neutralized.

However, high-dose gene therapy can lead to severe liver toxicity and even patient death. Neutralizing antibodies also tend to remain, meaning many gene therapies cannot be dosed multiple times. Investors may think these are “one-of-a-kind” treatments because of their curative potential, but it’s actually because of the safety concerns with ADAs.

Selecta Biosciences has shown in a clinical trial that ImmTOR can be dosed alongside gene therapies to reduce ADA formation, which could pave the way for the industry to use multiple lower doses while still achieving positive effects. more important. Bayer (Bayry) Pharmaceutical Takeda (TKPHF) and Sarepta Therapeutics (SRPT) have obtained licenses to use ImmTOR with their own gene therapy programs.

Does simplicity have value?

The industry has certainly shown interest in ImmTOR. A next-gen tool could be even better.

Selecta Biosciences is still optimizing the tool, called ImmTOR-IL, but early data suggests it may be safer, more effective, and require lower doses than ImmTOR. Investors can expect it to replace the first-generation tool in autoimmune diseases, gene therapy and other applications — eventually.

For now, investors should focus on small cap biotech execution. It has enough cash to fund its operations until mid-2024 after a painful dilution earlier this year. Upcoming announcements will include updates on preclinical asset development, portfolio optimization, and two Phase 3 data reads for an ImmTOR-powered drug candidate in Q1 2023. The latter will be the most significant for the stock.

If the experimental gout therapy proves successful, Selecta Biosciences could consider immediately monetizing the royalty stream. It could bring in more than $100 million in cash and accelerate the development of the main platform. It would also turn some heads – potentially putting this sneaky game of immune tolerance on the radar for good.

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