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June 2019 ETF Rebalance

Jun. 19, 2019

June 18th marked the semi-annual rebalance and reconstitution of the Cancer Immunotherapy ETF’s (Nasdaq: CNCR) underlying index. This happens in two steps. First, a committee of advisors that oversees the index gets together and determines the reconstitution, which means they decide if any new companies should be added. Second, once the index’s holdings have been finalized, a rebalance occurs and each company is given equal weight. CNCR ETF then places trades to replicate those changes as closely as possible. View all holdings of the Cancer Immunotherapy ETF.

For the June meeting, the committee has added five new immunotherapy companies. They are Autolus Therapeutics (Nasdaq: AUTL), CRISPR Therapeutics (Nasdaq: CRSP), Precision BioSciences (Nasdaq: DTIL), ZIOPHARM Oncology (Nasdaq: ZIOP), and Zymeworks (NYSE: ZYME).

These companies replace Adaptimmune (Nasdaq: ADAP), CytomX Therapeutics (Nasdaq: CTMX), Dynavax (Nasdaq: DVAX), FortySeven (Nasdaq: FTSV), and Mirati Therapeutics (Nasdaq: MRTX).

Brad Loncar, CEO of Loncar Investments and Chairman of the Index Committee, had the following comments, “The field of immunotherapy changes over time and our components naturally change with it. The five companies being added today all focus on the development of cell therapies or bi-specific antibodies. Our exposure to checkpoint combinations, an area experiencing challenges, has been greatly reduced. Having recently returned from the American Society of Clinical Oncology (ASCO) annual meeting in Chicago, I am optimistic about the promise that new technologies like these may hold in changing cancer care for the better.”

To help the fund’s investors and followers learn more about these additions, we have provided a brief background on their work and what sets them apart. The CNCR ETF is thrilled to welcome each of these companies to the fund.

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Autolus Therapeutics (Nasdaq: AUTL)

Autolus aims to be a leader in designing second and third generation T-cell therapies targeting both blood cancers and solid tumors. You might be familiar with first generation T-cell products like the CAR-T therapies that are currently on the market. As impressive as they are, today’s CAR-Ts come with drawbacks such as a high rate of toxic side effects like cytokine release syndrome and they are also limited in scope because current products only target one antigen (protein) on cancer cells. It is these types of issues that Autolus hopes to improve on with next generation technologies.

Autolus currently has four product candidates in clinical trials. AUTO1 is a CD19 CAR-T candidate that is designed to reduce the rate of high-grade cytokine release syndrome compared to currently marketed products. It does this by disengaging more rapidly once it interacts with targeted cells. AUTO3 is a CAR-T candidate that targets two antigens, CD19 and CD22. Some CAR-T patients sadly see their cancer relapse on traditional CD19 CAR-T products due to “antigen escape.” Autolus hopes to reduce this problem by adding the second CD22 antigen. Likewise, AUTO2 is a dual-antigen CAR-T designed specifically for multiple myeloma that targets BCMA and TACI. Lastly, there is AUTO4, which also recently entered trials. It is designed to avoid immunosuppression typically associated with current treatments.

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CRISPR Therapeutics (Nasdaq: CRSP)

As its name obviously suggests, CRISPR Therapeutics aims to be a leader in gene-based medicine using the CRISPR/Cas9 gene-editing approach. They are making a big push into cancer. In fact, the company was recently approved by FDA to begin a trial using its CTX110 CRISPR edited CAR-T cells that target CD19. This is all about using CRISPR/Cas9 and an allogeneic approach to CAR-T. You might know that today’s CAR-T products are autologous, meaning they need to be produced using the patient’s own cells. This comes with high cost and logistical challenges. By going allogeneic, companies like CRISPR Therapeutics hope to make “off-the-shelf” products that are derived from donors and are already available at the time a patient needs treatment.

CRISPR Therapeutics believes that using CRISPR/Cas9 for editing CAR-T cells comes with three main advantages. First, current CAR-T products use viruses to deliver the CAR construct into the DNA of T-cells that lead to random insertion. The company believes that using CRISPR/Cas9 will be more precise and safe. Second, CRISPR/Cas9 allows CRISPR Therapeutics to efficiently get rid of the T-cell receptor that can sometimes cause graft versus host disease with allogeneic (donor-derived) cells. Lastly, using CRISPR/Cas9 allows the company to eliminate the class 1 major histocompatibility complex on the CAR-T surface and might improve the durability of cells. Now that its first trial is approved, we will see if these theoretical improvements lead to real world clinical benefit compared to standard CAR-T treatments.

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Precision BioSciences (Nasdaq: DTIL)

Precision BioSciences has based its research on a proprietary gene-editing platform called ARCUS that is derived from a natural genome editing enzyme called a homing endonuclease. According to the company, the ability to target a single DNA break in a complex genome and achieve gene modification without random off-targeting makes homing endonucleases a good starting material for a therapeutic-grade genome editing technology. One major key to this is that unlike CRISPR and some other gene editing platforms, ARCUS is entirely proprietary to Precision BioSciences. It means that no other companies can use ARCUS (without a license) if it does in fact prove to be an advantageous gene editing method.

The company has a high focus on using this in cancer care and has already begun dosing patients in a trial of its ARCUS edited CD19 CAR-T for non-Hodgkin lymphoma and B-cell precursor acute lymphoblastic leukemia. The trial is being conducted at some of the leading cancer centers in the United States including City of Hope, Moffit Cancer Center, Dana-Farber Cancer Institute and MD Anderson Cancer Center. It is being developed in collaboration with Servier, a large French pharmaceutical company. In addition to adding the CAR that will help the T-cells recognize cancer cells, the ARCUS tool is used to delete genes that would cause the patient’s immune cells to attack the donor cells and also delete genes that would cause the T-cells to attack healthy tissues.

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ZIOPHARM Oncology (Nasdaq: ZIOP)

ZIOPHARM has been a component of CNCR ETF in the past, and we are happy to welcome it back. The company exclusively focuses on cancer and has two major platforms. The first, called controlled IL-12, is primarily being researched against brain cancers like glioblastoma multiforme. The idea is to use IL-12, a cytokine, to turn tumors where there is little natural immune activity into what we call a “hot tumors” because the IL-12 aims to attract T-cells to the tumor site. The IL-12 is encoded in an adenovirus that is injected in the tumor and can be turned on and off by a small molecule (pill) called veledimex. This is being tested as monotherapy and also in combination with Regeneron’s PD-1 inhibitor, Libtayo.

The second platform ZIOPHARM is focused on is called Sleeping Beauty and is being used in cell therapies. Sleeping Beauty is a non-viral approach to creating cell therapies and one advantage it has is that it can be manufactured quickly at the point of care where the patient is being treated. The company is currently testing various generations of this in CD19 CAR-T products at the MD Anderson Cancer Center in Houston. In addition, the National Cancer Institute, a partner with ZIOPHARM on T-cell receptor (TCR) therapy, was just granted approval by the U.S. Food and Drug Administration to begin a trial of a TCR using Sleeping Beauty that will express neoantigen-specific T-cell receptors. This means the TCRs will theoretically be hyper-personalized to each patient’s cancer.

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Zymeworks (NYSE: ZYME)

Zymeworks is based in Vancouver, Canada and is an emerging leader for engineering next generation biologics. This includes the development of bi-specific antibodies, antibody-drug conjugates, and Fc domain enhanced monoclonal antibodies. One thing we have been especially impressed with is the number of pharmaceutical partners the company’s knowhow and technology has attracted. Zymeworks currently has partnerships in place with Merck, Eli Lilly, Celgene, Glaxo, Johnson & Johnson, Daiichi-Sankyo, Leo Pharma, and BeiGene. Most of these partnerships involve the partner company developing a drug using Zymeworks’ technology and do not require a lot of capital and work on behalf of the company. This gives Zymeworks many potential shots on goal to success.

In terms of the products that Zymeworks is actively developing itself, the most advanced is a bi-specific antibody that can bind to two different epitopes of a target called HER2. HER2 expressing cancers include breast, gastric, and others. Gastric cancer is one of the most common cancers in China and is one reason why China-focused BeiGene partnered on this program. It was recently granted Fast Track designation by the U.S. Food and Drug Administration. To take the idea a step further, Zymeworks is also developing at HER2 bi-specific antibody that is also linked to a cytotoxic payload. A phase 1 study for this antibody-drug conjugate recently started enrolling patients in the United States. With many partnerships and these two programs of its own in the clinic, Zymeworks is set to have a busy remainder of 2019 and beyond.

Thank you for your interest in the Cancer Immunotherapy ETF. Be sure to sign up for email alerts below if you would like to receive notification of other news, company interviews, and research that we publish from time to time.

Opinions expressed are those of the author, interviewee, or Funds and are subject to change, are not intended to be a forecast of future events, a guarantee of future results, nor investment advice. Fund holdings and allocations are subject to change at any time and should not be considered a recommendation to buy or sell any security. Celgene, Daiichi-Sankyo, Eli Lilly, Glaxo, Johnson & Johnson, Leo Pharma, and Servier are not a holding of the Fund or affiliated with the Fund.


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CNCR Prospectus CHNA Prospectus

A basis point is a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01% (0.0001).

The Loncar Cancer Immunotherapy Index is an index of 25 securities that have a strategic focus on the area of cancer immunotherapy, or harnessing the immune system to fight cancer. Quotes for the index can be found under the symbol “LCINDX” on the Bloomberg Professional service and other financial data providers. One may not directly invest in an index.

The Loncar China BioPharma Index is an index of 29 securities that have a strategic focus on advancing China’s biopharma industry. Quotes for the index can be found under the symbol “LCHINA” on the Bloomberg Professional service and other financial data providers. One may not directly invest in an index.

Holdings are subject to change.

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Carefully consider the Fund’s investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fund’s prospectus, which may be obtained at www.loncarfunds.com. Read the prospectus carefully before investing.

Investing involves risk. Principal loss is possible. The fund may trade at a premium or discount to NAV. CNCR will invest in immunotherapy companies which are highly dependent on the development, procurement and marketing of drugs and the protection and exploitation of intellectual property rights. A company’s valuation can also be greatly affected if one of its products is proven or alleged to be unsafe, ineffective or unprofitable. The costs associated with developing new drugs can be significant, and the results are unpredictable. The process for obtaining regulatory approval by the U.S. Food and Drug Administration or other governmental regulatory authorities is long and costly and there can be no assurance that the necessary approvals with be obtained and maintained. The Fund may invest in foreign securities, which involve political, economic, currency risk, greater volatility, and differences in accounting methods. The Fund is non-diversified meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Therefore, the Fund is more exposed to individual stock volatility than a diversified fund. The Fund invests in smaller companies, which may have more limited liquidity and greater volatility compared to larger companies. The Fund is not actively managed and may be affected by a general decline in market segments related to the index. The fund invests in securities included in, or representative of securities included in, the index, regardless of their investment merits. The performance of the fund may diverge from that of the Index and may experience tracking error to a greater extent than a fund that seeks to replicate an index. Shares are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns.

RISK FOR THE CHNA ETF: The biopharmaceutical industry in China is strictly regulated and changes in such regulations, including banning or limiting certain products, may have a material adverse effect on the operations, revenues, and profitability of Biopharma Companies. The laws and regulations applicable to the process of administrative approval of medicine and its production in China require entities producing biopharma products to comply strictly with certain standards and specifications promulgated by the government. Changes in currency exchange rates and the relative value of non-U.S. currencies will affect the value of the investment. Currency exchange rates can be very volatile and can change quickly and unpredictably. Investments in non-U.S. securities involve certain risks that may not be present with investments in U.S. securities. For example, investments in non-U.S. securities may be subject to risk of loss due to foreign currency fluctuations or to political or economic instability. Investments in non-U.S. securities also may be subject to withholding or other taxes and may be subject to additional trading, settlement, custodial, and operational risks. These and other factors can make investments in the Fund more volatile and potentially less liquid than other types of investments. To the extent the Fund invests a significant portion of its assets in the securities of companies of a single country or region, such as China, it is more likely to be impacted by events or conditions affecting that country or region. The Fund is a recently organized, non-diversified management investment company with no operating history. As a result, prospective investors have no track record or history on which to base their investment decision. The Fund is considered to be non-diversified, which means that it may invest more of its assets in the securities of a single issuer or a smaller number of issuers than if it were a diversified fund. The Fund is not actively managed and the Fund's sub-adviser would not sell shares of an equity security due to current or projected underperformance of a security, industry or sector, unless that security is removed from the Index or the selling of shares of that security is otherwise required upon a reconstitution of the Index in accordance with the Index methodology. To the extent the Fund invests more heavily in particular sectors of the economy, its performance will be especially sensitive to developments that significantly affect those sectors."

Diversification may not protect against market risk.

Exchange Traded Concepts, LLC serves as the investment advisor, and Vident Investment Advisory, LLC serves as a sub advisor to the fund. The Funds are distributed by Quasar Distributors, LLC, which is not affiliated with Exchange Traded Concepts, LLC or any of its affiliates.