Orca Biosystems Issues Public Comment on Centers for Medicare & Medicaid Services Proposed Rule

WASHINGTON, July 20 -- Ivan Dimov, co-founder and CEO of Orca Biosystems Inc., Menlo Park, California, has issued a public comment on the Centers for Medicare and Medicaid Services' proposed rule entitled "Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Policy Changes and Fiscal Year 2021 Rates; Quality Reporting and Medicare and Medicaid Promoting Interoperability Programs Requirements for Eligible Hospitals and Critical Access Hospitals". The comment was written on July 8, 2020, and posted on July 15, 2020:

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Orca Biosystems, Inc. (Orca Bio) is a clinical-stage biotechnology company conducting research and development of transformative, allogeneic cellular therapies that will provide the promise of saving patients' lives. We appreciate the opportunity to provide public comments on the Centers for Medicare & Medicaid Services' (CMS) FY 2021 Inpatient Prospective Payment Systems (IPPS) Proposed Rule.

First, we want to commend CMS for its proposals to improve reimbursement for specific innovative therapies effective FY 2021:

* Proposed creation of a new MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell Immunotherapy)

* Proposed expansion of alternative new technology add-on payment (NTAP) pathway for Qualified Infections Disease Products (QIDP) to include products approved through the Food & Drug Administration's (FDA) Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD pathway)

While we applaud and support these efforts by CMS, we are concerned that these policies are too narrowly focused and do not consider the rapidly evolving adoptive cellular therapy (ACT) landscape where a major focal point of research is the potency of the immune system in development of innovative cellular therapy biologics for cancer. ACT may provide an additional treatment option for these patients and comprises the intravenous transfer of either tumor-resident or peripheral blood modified immune cells into cancer patient to mediate an anti-tumor function. More than 100 clinical trials have been initiated since 2015 and are currently being conducted with ACT./1

The Food and Drug Administration is working with cellular therapy companies, like Orca Bio, to advance these important advances in treatment through the Biologic License Application (BLA) pathway. CAR T-cell therapies are but one example of emerging therapies being advanced in the burgeoning, cellular therapy field. Other cellular-based mechanisms of action in development include tumor-infiltrating lymphocytes (TIL), gene-modified T cells expressing novel T cell receptors (TCR), among others. Blazar, et al 2020 reports on the research emphasis on the use of cell therapies to augment immune response that can control graft-versus-host-disease (GvHD) whilst simultaneously targeting cancer cells./2

Bertaina, et al 2019 states that methods of efficient homing and entry of effector T cells into tissues will also be critical to the clinical success of the adoptive immunotherapy approach./3

Regulatory T cells (Treg) are a specialized T cell subset that can suppress the immune effector response of other, "conventional" T cells (Tcon) through various contact dependent and independent mechanisms (e.g., reducing the activity of antigen presenting cells; secreting anti-inflammatory cytokines like IL-10 TGF?, IL-35; etc.)./4

In preclinical models and in retrospective and prospective studies, the use of Treg has been shown to be safe and may be effective in reducing GvHD rates. Treg have also been used in the post-transplant (after MA-alloHCT) to treat GvHD with the observation of concerning safety events and with possible efficacy./5,/6,/7

At Orca Bio, we are developing a pipeline of high precision allogeneic cell therapy biologics that are designed to safely and effectively replace a patient's blood and immune system with a healthy one. We use a proprietary high precision mixture of naturally occurring T cells; we only work with allogenic blood products. The manufacturing platform sorts donor blood with single-cell precision and a high level of purity and speed, enabling the creation of proprietary, optimal therapeutic mixtures of immune and stem cells that have the potential to transform allogeneic cell therapy. Our manufacturing platform enables us to keep the cells that are beneficial and remove the cells that cause adverse effects.

We are the first company to deliver a high precision cell therapy biologic (i.e. the therapy is controlled cell by cell) and have successfully treated the largest-ever number of patients with such a therapy in two ongoing clinical studies. The company's most advanced cellular program, TRGFT-201, is evaluating a highly controlled formation of T cells that includes subsets of regulatory T cells, in a multi-center Phase Ib clinical trial in patients with certain blood cancers. The company's second program, OGFT-001, is evaluating a fully controlled cellular biologic that contains a next generation formulation of T cells also in patients with blood cancers. Each cellular biologic product candidate has the potential to deliver curative outcomes for the indications Orca Bio is pursuing.

We believe our high precision cell therapy biologics have the potential to replace conventional bone marrow transplant and significantly expand the eligible patient population by reducing severe toxicities associated with the treatment today. With precise reconstitution and a swift reboot of the patient's immune system, our investigational cell therapy biologics seek to bring curative outcomes and significantly reduce fatal side effects for patients with terminal blood cancer.

Importantly, our approach also has significant potential for patients suffering from many other cancers and diseases like genetic diseases and autoimmune disorders.

As a private company, Orca Bio relies on its abilities to raise capital to fund research and development programs for these innovative allogeneic cellular therapies. A key part of each potential investor's due diligence is the question around whether adequate reimbursement will be available upon FDA approval. Without reimbursement predictability, emerging companies such as ourselves will not be able to continue to raise the investment dollars that are needed to continue the innovative cellular therapy research and development and some Medicare beneficiaries could be denied access to these substantial treatment advancements.

Thus, Orca Bio has two specific requests of CMS that we believe will go a long way in providing predictability of adequate reimbursement for these promising cellular therapies as they receive FDA approval under the BLA regulatory pathway. Not only will CMS' adoption of these proposed policy changes signal predictable and adequate reimbursement for the Medicare beneficiaries, other payers will almost assuredly follow CMS' lead as they have done historically.

1. ORCA BIO URGES CMS TO EXPAND CELLULAR THERAPY BIOLOGICS REIMBURSED UNDER MS-DRG 018 TO INCLUDE ALL NEWLY APPROVED CELLULAR THERAPY BIOLOGICS UNTIL SUCH TIME AS THOSE THERAPIES ESTABLISH THEIR OWN NEED FOR A SEPARATE MS-DRG

In the May 11, 2020 Fact Sheet announcing key proposals from the FY 2021 IPPS Proposed Rule, CMS states that the proposed creation of the new MS-DRG 018 specifically for cases involving CAR T-cell therapies builds on the actions it has taken to date for payment for new medical technologies. Cases reporting ICD-10-PCS procedure codes for CAR T-cell therapies would map to MS-DRG 018. CMS states that the new payment group would help to predictably compensate hospitals for their costs in delivering necessary care to Medicare beneficiaries and provide payment flexibility for the future as new CAR T-cell therapies become available./8

We agree with the creation of this proposed MS-DRG 018 and agree that such a new payment group should be flexible enough to incorporate new therapies as they become available. However, we are concerned that CMS has made the payment group specific to one mechanistic approach to cellular therapy and has not provided for the array of cellular therapies in development as described earlier in this letter. Without this flexibility to incorporate future development and FDA approval of cellular therapies where resource consumption will be highly similar to CAR T-cell therapy administration and patient management, history will repeat itself where initially these cellular therapies with different mechanisms of action, i.e. not autologous CAR T-cell therapies, will be mapped to inadequately reimbursed MS-DRGs and will not have payment predictability. It could take 3 years for a new or expanded payment group to occur as has been the case with CAR T-cell therapies. Specifically, YESCARTA was the first autologous CAR T-cell therapy approved for the treatment of large B-cell lymphoma in October 2017; MS-DRG 018 is proposed to become effective October 2020, 3 years following FDA approval. Inadequate reimbursement has placed untold economic burden on the hospitals that have embraced the substantial clinical improvement afforded by CAR T-cell therapy and, most importantly, has placed Medicare beneficiaries and their physicians at risk of being unable to access this innovative therapy for treatment of these hematologic malignancies.

We urge CMS to continue its actions to provide predictable compensation to hospitals by making the policy decision now to expand MS-DRG 018 to provide payment flexibility for the future of cellular therapies as they become available, not just for new CAR T-cell therapies. We also request that CMS retain the flexibility to create separate MS-DRG(s) for sub-groups of cellular therapies in the future as more is learned about actual resource consumption of these innovative therapeutic approaches. Should one or more new MS-DRGs be necessary, we urge CMS to adopt a more rapid evaluation and implementation timeframe so that a three-year lag is not required while hospitals may be under-compensated.

2. ORCA BIO URGES CMS TO EXTEND THE ALTERNATIVE NTAP PATHWAY AND ADDITIONAL NTAP REIMBURSEMENT TO THERAPIES THAT ARE GRANTED REGENERATIVE MEDICINE ADVANCED THERAPY (RMAT) DESIGNATION BY THE FDA

In the FY 2021 IPPS Proposed Rule, CMS is proposing to expand the alternative NTAP pathway for antimicrobial products designated by FDA as QIDPs to include products approved under FDA's LPAD pathway.

* FDA may approve an antibacterial or antifungal drug, alone or in combination with one or more other drugs, under the LPAD pathway, if the drug is intended to treat a serious or life-threatening infection in a limited population of patients with unmet needs. FDA states that determining whether a condition is serious generally is based on whether the drug will have an impact on such factors as survival, day-to-day functioning, or the likelihood that the condition, if left untreated, will progress from a less severe condition to a more serious one./9

Effective FY 2021, for drugs approved under the FDA's LPAD pathway, CMS is proposing expansion of the alternative NTAP pathway and additional NTAP reimbursement already provided for drugs designated as QIDPs.

* As is the case for QIDPs, CMS is proposing that antimicrobial drugs approved under FDA's LPAD pathway would be considered new and not substantially similar to an existing technology and would not need to demonstrate that it meets the substantial clinical improvement criterion. Instead, the new technology would only need to meet the cost criterion.

* CMS is also proposing to increase the maximum NTAP percentage for a product approved under FDA's LPAD pathway, from 65 percent to 75 percent, consistent with the NTAP percentage that currently applies for a product that is designated by FDA as a QIDP.

CMS is also proposing to revise the title of existing Sec. 412.87(d) to refer more broadly to "certain antimicrobial products" rather than specifying in this title the particular FDA programs for antimicrobial products (that is, QIDPs and LPADs). And, in order to allow eligible antimicrobial products to begin receiving the new NTAP sooner, CMS is proposing to provide for conditional approval for antimicrobial products that otherwise meet the NTAP alternative pathway criteria but do not receive FDA approval in time for consideration in the final rule (by July 1, the current deadline for consideration in the final rule). It is proposed that those antimicrobial products that would otherwise meet the applicable NTAP criteria would begin receiving the NTAP effective for discharges the quarter after the date of FDA marketing authorization instead of waiting until the next fiscal year, provided FDA marketing authorization is received by July 1 of the particular fiscal year for which the applicant applied for NTAP consideration.

We appreciate the special considerations CMS is proposing to extend to drugs approved under the QIDP designation and LPAD pathway so that the NTAP pathway is abbreviated, the NTAP percentage is increased, and hospitals' access to NTAP reimbursement is accelerated.

We urge CMS to make these same NTAP enhancements to therapeutic cellular therapies that have received FDA RMAT designation. As described in Section 3033 of the 21st Century Cures Act, a drug is eligible for RMAT/10 designation if:

* The drug is a regenerative medicine therapy, which is defined as a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, except for those regulated solely under Section 361 of the Public Health Service Act and part 1271 of Title 21, Code of Federal Regulations;

* The drug is intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition; and

* Preliminary clinical evidence indicates that the drug has the potential to address unmet medical needs for such disease or condition.

As with drugs designated QIDP and LPAD pathway, a RMAT-designated drug (cell therapy) should be considered new and not substantially similar to an existing technology and should not need to demonstrate that it meets the NTAP substantial clinical improvement criterion, only the cost criterion. And, as with QIDP and LPAD-designated drugs, RMAT-designated drugs should receive the NTAP maximum percentage of 75 percent. Importantly, RMAT-designated drugs should be eligible for the conditional approval that CMS proposes to be extended to QIDP and LPAD-designated drugs whereby hospital could begin receiving the NTAP effective for discharges the quarter after the date of FDA marketing authorization. Without this conditional approval for RMAT-designated cellular drug therapies, history will repeat itself as in the case of the CAR-T therapy, YESCARTA, where FDA approval was granted on October 17, 2017 but, because of the NTAP deadline, the YESCARTA NTAP did not become effective until October 1, 2018, a full year after FDA approval. Hospitals were negatively impacted, and many were unable to continue their cell therapy program as envisioned which caused a barrier to access for their patients. We believe reports by hospitals of this fiscal toxicity, in large part, were influential in CMS' proposal to establish the MS-DRG 018 specific to CAR T-cell therapies.

Conclusions

It is evident that CMS is making advances in its policies to provide for more predictability in payment and encourage access to innovative therapies. We believe our request 1) for expansion of MS-DRG 018 to provide for flexibility in payment of new cellular therapy approvals, while retaining flexibility should additional MS-DRGs be needed for innovative cellular therapy sub-groups, and 2) for extension of the alternative and enhanced NTAP policies to accelerate access to RMAT-designated cell therapies will allow CMS to further its stated objective of transforming the healthcare delivery system through competition and innovation to provide patients with better value and results./8

In closing, Orca Bio thanks CMS for the opportunity to describe our transformative, high precision cell therapy biologics that have the potential to eliminate fatal side effects, such as GvHD and infections commonly associated with bone marrow transplants while maintaining or enhancing anti-tumor efficacy. Our team would welcome the opportunity to meet with CMS leadership to further describe the Orca Bio development platform and to establish an ongoing dialogue as CMS designs its future policies for innovative cellular therapies approved under the BLA pathway.

Sincerely,

Ivan Dimov, PhD

Co-founder and CEO

[email protected]

+1 510 501 1670

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Footnotes:

1/ Rohaan M, et al. Adoptive cellular therapies : the current landscape. Virchos Arch (2019) 474:449-461.

2/ Blazar BR, et al. Dissecting the biology of allogeneic HSCT to enhance the GvT effect whilst minimizing GvHD. Nature Reviews Clinical Oncology. www.nature.com/nrclinonc.

3/ Bertaina A and Roncarolo MG. Graft engineering and adoptive immunotherapy: new approaches to promote immune tolerance after hematopoietic stem cell transplantation. Frontiers in Immunology. July 2019: Vol 10; Article 1342.

4/ Heinrichs J, et al. Regulatory T-Cell therapy for graft-versus-host disease. J Immunol Res Ther. 2016 ; 1(1): 1-14.

5/ Trzonkowski P, et al. First-in-man clinical results of the treatment of patients with graft versus host disease with human ex vivo expanded CD4+CD25+CD127- T regulatory cells. Clinical Immunology 2009; 133: 22-26.

6/ Theil A, et al. Adoptive transfer of allogeneic regulatory T cells into patients with chronic graft-versus-host disease Cytotherapy, 2015; 17(4): 473-486.

7/ Johnston L, et al. A phase I study of donor regulatory T Cells as treatment for steroid dependent/ refractory chronic graft versus host disease. Blood 2016; 128(22):385.

8/ Fact Sheet, FY 2021 IPPS Proposed Rule (CMS-1735-P). www.cms.gov/newsroom/fact-sheets/fiscal-year-fy-2021-Medicare-hospital-inpatient-prospective=payment-system-ipps-and-long-term-actute

9/ Limited Population Pathway for Antibacterial and Antifungal Drugs - the LPAD Pathway. https://www.fda.gov/Drugs/development-resources/limited-population-pathway-antibacterial-and-antifungal-drugs-lpad-pathway

10/ Regenerative Medicine Advanced Therapy Designation. https://www.fda/gov.vaccines-blood-biologics/cellular- gene -therapy-products/regenerative-medicine-advanced-therapy-designation

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The proposed rule can be viewed at: https://www.regulations.gov/document?D=CMS-2020-0052-0002

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