Expert Financial Analysis and Reporting

Introduction

I have been working on a report on Kite for over three months and have in front of me a rough draft that is about 60 pages long and still evolving. I can’t seem to get the report finished as new areas for investigation just keep coming up. I am also concerned that it is foreboding to ask readers to wade through a report of that length. These factors have caused me to take a different approach; instead of one large report I plan to publish several smaller and more easily digestible smaller reports.

The first part is a glossary. There are a number of terms that occur frequently when discussing the technology of Kite. I have put together some definitions that are expressed in layman’s terms. You may wonder why these are not arranged in alphabetical order. The reason is that I have tried to build a foundation starting with basic terms which are helpful in understanding subsequent ones. I think that as you read other sections of my report on Kite that you may want to refer back to this glossary.

I have also used a number of acronyms in this report. I have listed these in this section in alphabetical order.

Lymphoid cells are white blood cells of the immune system including T-cells and B-cells. Stem cells in the bone marrow give rise to an immature cell which then goes through a series of differentiations into other cells before becoming a mature B or T cell. T-cells directly engage with disease targets while B-cells produce antibodies against them that work in concert with other components of the immune system. Because cells of the B-cell and T-cell lineage are rapidly dividing, they are prone to mutations that can cause numerous types of hematological (blood) cancers.

Leukemias are when cells in the B-cell or T-cell lineage mutate and begin to grow uncontrollably in the bone marrow. They crowd out and inhibit the production of normal white blood cells (such as T-cells and B-cells), oxygen carrying red blood cells and platelets that control clotting. There are numerous types of leukemias dependent on which cells in the B-cell or T-cell lineage have become cancerous. In addition to crowding out production of other cells in the bone marrow, they also spread to and from tumor masses in other organs.

Lymphomas are cancers of lymphoid cells in the lymph nodes, spleen, thymus, bone marrow, and other tissues of the body. The main difference between lymphocytic leukemias and lymphomas is that in leukemia, the cancer cell is mainly in the bone marrow and blood, while in lymphoma it tends to be in lymph nodes and other lymph tissues. While the two cancers share certain symptoms, there are stark differences between their origins, symptoms, and treatments. There are two main types of lymphomas: (1) non-Hodgkin’s which is the most common and (2) Hodgkin’s lymphoma. Non-Hodgkin’s affects immature cells at various stage in the B-cell lineage while Hodgkin’s is a cancer of mature B-cells.

Acute lymphocytic leukemia (ALL) is characterized by the overproduction and accumulation of cancerous, immature white blood cells in the bone marrow. These are also referred to as lymphoblasts so that acute lymphocytic leukemia is also known as acute lymphoblastic leukemia. About 90% of ALL cases occur in the B-cell lineage and 10% in T-cells. ALL is most common in childhood, with a peak incidence at 2–5 years of age, but there is another peak in old age. Acute means that the cancer is aggressive and grows rapidly. The annual incidence of ALL in the US is about 6,600 cases with most cases occurring in children aged 2 to 20. About 80% of childhood ALL can be cured with standard of care. Even though the prevalence of ALL is much less, about 4 out of 5 deaths from ALL occur in adults.

Chronic lymphocytic leukemia (CLL) is a slower progressing form of lymphocytic leukemia than ALL. It can transform over time into the more aggressive ALL form of cancer.

Non-Hodgkin lymphoma (NHL) is a heterogeneous group of cancers originating in immature B lymphocytes and T-lymphocytes. The annual incidence in the US is about 70,000 cases and this leads to about 19,000 deaths per year. About 85% of NHL cases occur in B-lymphocytes. NHL is the most prevalent hematological malignancy and is the seventh leading cause of new cancers among men and women accounting for 4% of all new cancer cases and 3% of deaths related to cancer

Diffuse large B cell lymphoma (DLBCL) is an aggressive fast growing cancer and is the most common sub-type of NHL accounting for about 30% of cases. There are 22,000 newly diagnosed cases annually. About 60% of cases can be cured with standard of care which is a combination of chemotherapy and Rituxan. The 9,000 or so patients who do not respond to standard of care have a particularly dire prognosis, with no curative treatment options and median overall survival expectation of about 6 months. This is the initial disease target chosen for Kite’s lead drug KTE-C19.

Primary mediastinal B cell lymphoma (PMBCL) is also an aggressive form on NHL and responds similarly to current treatments as DLBCL and has a similar outcome. It is often thought of and diagnosed as a sub-type of DLBCL, but it has distinct clinical, pathological, and molecular characteristics when compared to DLBCL.  It represents about 3% of patients diagnosed with DLBCL.  Primary mediastinal B cell lymphoma is typically identified in the younger adult population in the fourth decade of life with a slight female predominance.

Follicular lymphoma (FL) is another type of B cell lymphoma which is the most common indolent (slow-growing) form of NHL, accounting for approximately 20% to 30% of all NHLs or slightly less than DLBCL. The course of this disease can run over a decade or more unlike DLBCL which if uncured can cause death in three years or so.

Transformed follicular lymphoma (TFL) is a condition in which follicular lymphoma transforms into a more aggressive form of cancer. Histological transformation to a condition comparable to DLBCL occurs at an annual rate of approximately 3% for 15 years with the risk of transformation continuing to drop in subsequent years.  It is treated similarly to DLBCL and has a similar outcome. The biologic mechanism of histologic transformation is unknown.

Relapsed cancer is a cancer that begins to grow again after responding to the latest treatment received.

Refractory cancer is a cancer that no longer responds to any current chemotherapy treatment

ZUMA-1 is the key phase 2 trial now underway by Kite. It is an open label trial in which one arm will enroll 112 relapsed/ refractory DLBCL patients and a second arm will enroll a combined 40 relapsed and refractory PMBCL and TFL patients.

Engineered Autologous T-cells (eACTS) are T-cells that are removed from a patient and genetically engineered to increase their activity against cancer cells that express certain antigens. They are then expanded ex vivo into billions of clones that are reinfused into the patient where they continue to differentiate in vivo and attack their cancer target.

Chimeric antigen receptor T-Cells (CAR-T) are the first generation of eACTs. Genetic engineering leads to the expression on the surface of the T-cell of an artificial receptor that has a fragment of an antibody, which can target a particular cancer antigen. These cells combine the specificity of an antibody with the killing power of a T-cell.

KTE-C19 is Kite’s only product in clinical trials. There is a molecular complex called CD-19 that occurs on all cells of the B-cell lineage (both normal and cancerous) except for the stem cell and the mature antibody producing plasma cell. KTE-C19 targets and destroys all cells that express CD-19 so that it is only effective in B-cell hematological cancers such as ALL, DLBCL, PMBCL, FL, TFL and others. These types of cancer account for perhaps 4% of annual cases of cancer in the US; KTE-C19 is not of any value in treating solid tumors and some hematological cancers such as T-cells lymphomas and leukemias, multiple myeloma and Hodgkin’s lymphoma that do not express CD-19.

Objective Responses are a measure of tumor shrinkage and are used as the primary endpoint of the ZUMA-1 study. A complete response (CR) is defined as the absence of any sign of the tumor with the exception of scar tissue. A partial response (PR) is defined as shrinkage of >50% of the tumor mass. The sum of CRs and PRs is called the objective response rate (ORR).

Side Effects Grading By Severity A death is rated as a grade 5 side effect. Grade 4 are life threatening requiring hospitalization, grade 3 are serious, grade 2 are moderate and grade 1 are mild.

Acronyms Commonly Used in Reports on Kite

I am also listing acronyms in alphabetical order.

ALL--Acute lymphocytic leukemia

CAR-T Chimeric antigen receptor T-Cells

CLL-- Chronic lymphocytic leukemia

CR -- Complete Response

DLBCL--Diffuse large B cell lymphoma

DSMB-- Data Safety and Monitoring Board

eACTs-- Engineered Autologous T-cells

FL--Follicular lymphoma