Markman Capital Insight

Tech takes on the T-cells

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Sean Parker, a former Facebook president and Napster co-founder, made headlines in April by announcing he would donate $250 million to immune therapy cancer research. Say what you will about the tech billionaire, but he has shown an impeccable talent for attaching himself to winning ideas at just the right time.

Immunotherapy is certainly not new. For decades, researchers have sought a way to harness the inherent prowess of the human immune system. The concept is a simple: The immune system has powerful agents called T-cells that seek out and destroy harmful invading viruses and infections; so why not use these same weapons to fight cancer?

It makes perfect sense except that scientists quickly discovered that cancer and other maladies, like HIV, are often able to hide from T-cells. In 1992,Japanese scientists determined the reason for this evasion was a special molecule on T-cells which they labeled “program death 1″ (PD1). Disrupting PD1 has met with varying degrees of success. In some cases, new drugs were temporarily effective and in other cases the results were catastrophic, with T-cells destroying cells indiscriminately, causing patient death.

Enter gene-editing and big data. By snipping and fixing DNA, researchers have been able to modify T-cells to make them more effective cancer warriors. The biotechnology firm Cellectis used the TALENs gene-editing process to construct T-cells that specifically found and destroyed blood cell abnormalities common to leukemia. In the first celebrated case, this procedure led to the complete cure of a British toddler.

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Since then 300 additional patients have enjoyed mostly spectacular results. In 2015, Alphabet (GOOG) held a conference with leading oncologists and biologists at Massachusetts Institute of Technology expressly to determine what parts of the process could benefit from its expertise in machine learning and compute power. Its Verily biotechnology subsidiary is now believed to be working on therapies that evolve from better understanding how T-cells attack cancer within the tumor.

And Jeffrey Hammerbacker, the former Facebook (FB) big-data powerhouse is now at Mount Sinai Hospital in New York City, where he and 12programmers are developing software that determines how a person’s DNA can be optimized to build better cancer-fighting T-cells. By most accounts, the science is still about two years away from legitimate curative medicines. But as the discovery process moves closer to computing, the odds increase and timelines shorten. This would be an extraordinary discovery.

Most of the enthusiasm for immunotherapy stocks occurred two years ago with Kite Pharmaceuticals (KITE), first off the mark with an initial public offering in June 2014. Juno Therapeutics (JUNO) andBellicum Pharmaceuticals (BLCM) came to market in December 2014. And Cellectis SA (CLLS) went public March 2015. Since that time, the majors have swooped-in for exposure as the sciencestepped-up. In June 2015 Celgene (CELG) spent $1 billion for a slice of the T-cell treatment portfolio of Juno and Pfizer (PFE) and French pharma company Servier paid Cellectis SA $40 million for the “first off the shelf” rights for its T-cell treatment for leukemia.

Last week Sean Parker put himself in the middle of genetically modified, immune-cell therapies. These therapies hold potential cures for autoimmune disorders including multiple sclerosis, lupus, HIV, arthritis, diabetes and cancer. Not bad for a guy who started out building software to help teens steal music online. These stocks are buys on dips for the next several years.

About Jon Markman:  A pioneer in the development of stock-rating systems and screening software, Jon Markman is co-inventor on two Microsoft patents and author of the bestselling books The New Day Trader Advantage, Swing Trading and Online Investing, as well as the annotated edition of Reminiscences of a Stock Operator.  He was portfolio manager and senior investment strategist at a multi-strategy hedge fund from 2002 to 2005; managing editor and columnist at CNBC on MSN Money from 1997 to 2002; and an editor, investments columnist and investigative reporter at the Los Angeles Times from 1984 to 1997.

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