Allogeneic CART pioneer - Cellectis (CLLS US)

Just sharing some lessons I have learnt over the years.

Biotech is a field to plough. It is a space best suited to the specialists. I often struggle to figure out how to value biotech companies.

One lesson for me... While I am a long term investor, I don't think I will ever invest in phase 1 clinical biotech anymore.

Another lesson for me is looking for what I would call a "mission" stock. A mission stock has management I believe in (even when others may hate them). It is working on something amazing/revolutionary. Low market expectation and significant P&L inflection. However long it takes, as long as it moves in the right direction (say delivering on its product roadmap), I will hold the stock comes hell or high water.

Obviously, a mission stock comes with risks... The stock market is mostly efficient after all. BUT on the other hand, a successful mission stock will deliver out size return.

Cellectis is a "mission" stock in my book. It has the best and the worst of both world. Do note that there are plenty of risks when it comes to Cellectis.

Believe me... A phase 1 biotech can take years to deliver (say 8 to 10 years). I first invested in Cellectis about 7-8 years ago. Through it all, I lived through a market that was favorable (if not euphoric towards biotechs) and the ensuing nuclear winter. Still, very much in the red... But I averaged down and down because I believe in what it tries to do.

Now how does Cellectis tick the boxes for being a "mission" stock. The "next frontier" for me is genomic medicine/cell therapy. Dr Choulika (founder/CEO) is one of the pioneers in gene editing technology. It has its own gene editing technology (talen).... But to me, it is much of the same vs. CRISPR, Zinc fingers... At the end of the day, it is about the efficacy of the drug.... Still, Cellectis has a team of rocket scientists capable of changing the world with its gene editing technology.

Cellectis is the pioneer of allogeneic CART/cell therapy in the world. Its technology when proven can substantially improve upon autologous CART because: i) cost will be lower (much lower) as its cells are donor derived and not require to be tailor made, ii) better for patients (readily available rather than having to wait for the manufacturing cycle that can take as long as month... remember it is treating very sick patients so time matters)....

Why is allogeneic CART a big deal ? It is because its drugs are for patients who have exhausted all options and have months to live. Importantly, its drugs can deliver CR/complete response i.e. curative and all the cancer cells are wiped out from the body.

There are three angles to Cellectis. It has licensed its techology to Allogene. Allogene has secured the most popular CAR-T target (CD-19) for its drug. Importantly, Allogene has changed its strategy from the late line to front line (i.e. it can cover more patients). Quite a clever strategy actually. It plans to target patients who may relapse after first line of treatment. The idea is after first line treatment, if there are residual cancer cells (not as many cancer cells in late stage), Allogene CD-19 (with smaller doses) can wipe out the remaining cancer cells readily. It is similar to putting out fire when the ashes still smoking.... It is currently running its pivotal trial now. Final result expected in mid 2028. Peak sales is expected to be around $2-3bn. Upon approval, Cellectis is eligible to earn milestone payment of $340M + double digits (11-12%) of sales royalty.

The second angle of Cellectis is its internal pipeline. It has two drugs.. Lasme-cel for a niche blood cancer indication (ALL)... Currently in pivotal trial... Result due Q1 28. Peak sales expected to be around $700M. Its other program Eti-cel should have phase 1 data in Q4. Early indication is promising.. Of the 8 patients in phase 1 at the anticipated dose level, 5 patients reported CR/complete response. Pivotal trial to start in 2027. Say should wrap up in 2029. This has the potential of a blockbuster (multi-bn potential as it targets a large indication like NHL).

Cellectis is internally confident that these two drugs will gain FDA approvals in the future. Take Lasme-cel for example, its pivotal trial is targeting patients who are younger than the overall phase 1 cohort... So should have better clinical outcome.

The third angle is its partnership with AstraZeneca. AstraZeneca acquired a 44% stake in Cellectis during the biotech winter (about 2-3 years ago). Of note, it paid $5/share. Under the partnership, AstraZeneca engaged Cellectis for R&D for 4 clinical (up to 10) targets/indications. Cellectis gets to earn milestones + royalties if these drugs are ever approved. If I am not mistaken, Cellectis is working on an Inv-vivo CART program for AstraZ. I saw an interview of the Dr Choulika.... He characterized one of the R&D programs as disruptive.... It is also likely AstraZ and Cellectis are working on CAR-T for auto-immune disease (very big market opportunity). So far, Cellectis has been tight lipped on progress on these programs. Guess we will find out.

The biggest challenge facing Cellectis is its cash run way. It has net cash of $188M. Cash runway to Q4 27. As we can see, it needs to raise capital at some point. My speculation is it probably needs to raise $200M or so.

The company's plan is it plans to release more data on Lasme-cel and Eti-cell in Q4 26. Assuming data is favorable, stock price should increase and it will raise capital then.

So roughly... This is my base case... Say Cellectis has to raise $200M... Its MV is currently US$240M (vs. cash of $188M in Q1 26).... Say its MV is $450M all up.....

What is the upside ? When Allogene's drug is approved, Cellectis will earn milestone of $340M and ongoing royalty of as much as $2-300M. I would say its partnership with Allogene is worth $1-2bn.

Lasme-cell peak sales of $700M (maybe up to $1bn if it is approved for earlier line).... Say 30% net margin, we are looking at net profit of $200M or so. Eti-cell can potentially be a blockbuster (say $1-2bn peak sales).....

Plus whatever upside/royalties/milestones it stands to earn from AstraZ.

My base case is it is not far fetch to think one day Cellectis will earn net profit of over $4-500M a year.

What are the risks ? Key risks would be clinical trials of Allogene and Cellectis fail. My read is they would be OK. Allogene passed the early futility analysis in Q2 26. Another risk is AstraZeneca may decide to privatize Cellectis before its programs mature.

Something else to watch is significant upside if Allogene and its own trial (Lasme-cel) prove to be so good that they can complete early. For example, the goal for Lasme-cel is to tide patients over to HSCT (stem cell transplant) so it won't need to wait for survival data (OS/progression free survival etc etc).

Another thing to note is Cellectis has its own cell making facility.... Its internally produced cells have proven to be more potent than cells produced externally... It is a company with depth... There may be strategic value in Cellectis partnering with AstraZeneca on other cell therapy/gene therapy products. For example, AstraZ bought Gracell (a CART company originally from China) in 2023.

Have a look at its chart... the stock has gone nowhere for over 10 years... It is a French biotech listed in USA... No one cares... Cell/gene therapy has been unpopular... Hard science. It is a pioneer in allogeneic CART and it has the making of a platform company of the future...

Downside is clearly zero... BUT upside is significant (multi bagger potential).

Note.. Do you own research. Not investment advice. I may own the stock.