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Gritstone Oncology shares nearly quadruple after receiving NIH support on vaccine trial

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Key Points
  • Gritstone Oncology received backing from the National Institute of Allergy and Infectious Diseases to study a potential vaccine for coronavirus mutations that have been discovered around the globe.
  • "It's a very natural extension of what we've been doing," Gritstone CEO Andrew Allen told CNBC's Jim Cramer.
  • "At some level, we hoped that it would never be necessary [for coronavirus], but … we are now starting to see some resistant variants arising such that we may need alternative approaches such as ours," he said.
VIDEO2:1002:10
Gritstone Oncology CEO on leveraging cancer drug development for coronavirus vaccine

Shares of a small cancer drugmaker have surged fourfold this week after the company received backing from an arm of the National Institutes of Health to begin testing a potential coronavirus vaccine that could fight off coronavirus mutations that have been found around the globe.

Gritstone Oncology stock soared almost 300% in the past two trading sessions after it was announced that the company entered into a clinical trial agreement with the National Institute of Allergy and Infectious Diseases to test what the company is calling a second-generation vaccine that could protect against Covid-19 spike mutants.

Gritstone CEO Andrew Allen appeared on CNBC Wednesday to discuss the developments, telling Jim Cramer that scientists leveraged their oncology research to develop the solution.

"It's a very natural extension of what we've been doing," Allen said on "Mad Money." "At some level, we hoped that it would never be necessary [for coronavirus], but … we are now starting to see some resistant variants arising such that we may need alternative approaches such as ours."

Gritstone also received backing from the Bill & Melinda Gates Foundation to assist in preclinical evaluations of the potential coronavirus vaccine. Founded five years ago, the Emeryville, California-based biotech outfit created a solution to trigger the immune system to react to cancer cells. The company identified and isolated proteins on the surface of cancer cells that are foreign to the body to produce a vaccine that can instruct white blood cells to effectively kill tumor cells, Allen explained.

"As Covid came along, it was very clear that it was possible there would become resistance variants within the virus and that using T cells of that arm of the immune system as part of the solution would potentially be important," he said.

The comments come as health officials around the globe sound the alarm about the discovery of coronavirus mutations. As of Wednesday, Germany, the United Kingdom and South Africa have reported finding different variants of the virus among sickened patients. The variants contracted in Great Britain and South African are said to spread more easily.

Cramer likened Gritstone to Moderna, another drugmaker with an oncology focus that has rolled out a coronavirus vaccine that it found to be about 95% effective in preventing transmission.

Allen praised Moderna, explaining how the company's vaccine solution focuses on spike protein on the outside of the virus that is a target for antibodies. He said Gritstone's potential vaccine goes even further, utilizing T cells.

"T cells kill virally infected cells and that's why we have both of these limbs to the immune system. They complement and reinforce each other, and what we've done is we've captured all the benefits of spike potentially," he said. "Our program does drive antibodies to spike, but now we're expanding it to include additional targets from the virus and driving strong T cell responses against those targets."

Allen said he expects a Phase 1 study, which is supported by the NIAID, to begin soon. Gritstone applies both self-amplifying mRNA and adenoviral vectors to trigger an immune response, according to a press release announcing the partnership.

After rallying 14% to a $25.49 close Wednesday, Gritstone shares have fallen more than 6% in afterhour trading. The stock shot up from less than $4 to begin the year to a peak of $35.20 during Wednesday's session.

Shares have jumped nearly 547% in less than three weeks of trading.

VIDEO7:4107:41
Gritstone Oncology CEO on developing second generation Covid-19 vaccine

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