What: Shares of the clinical-stage biopharma Juno Therapeutics (JUNO) jumped by 33% on exceptionally high volume today after the company announced a 10-year licensing agreement with Celgene Corp. (CELG) for its CAR-T and TCR drug development platform. Per the press release, the broad-based collaboration will focus on cancer immunotherapy and autoimmune disorders.
Although there are a number of important details investors should take the time to understand about this rather broad collaboration, the key issue is that Celgene will immediately invest a staggering $1 billion in Juno by buying 9.1 million shares of Juno at $93 a share, giving it a 10% stake in the company. Celgene also has the right, during pre-specified opt-in windows, to take up to a 30% stake in Juno.
So what: Celgene is making a huge bet on a company with a largely unproven drug development platform (Juno's platform is only now entering midstage trials). So, this billion dollar price tag suggests, to me, that there was probably another party lurking in the shadows that gave Juno some serious leverage in the negotiations. And that means other CAR-T players like Bellicum Pharmaceuticals and Kite Pharma may be close to striking similar deals with big pharmas hungry to augment their immuno-oncology pipelines. In fact, I think AstraZeneca is going to the next big drugmaker to throw its hat in the CAR-T ring through either a partnership or a buyout.
Now what: After this deal closes in the third-quarter, Juno should have more than enough cash to see its lead experimental candidates, CD19 and CD22, through their midstage trials without having to dilute shareholders further. If things go according to plan, Celgene will then have the right to opt-in on other Juno assets, or the biotech may simply decide to buy Juno lock, stock, and barrel. My initial take is that Celgene probably is planning on buying Juno if its CAR-T and TCR platforms live up to their billing, and this lucrative deal is simply a way to ward off any would-be competitors.
