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What happened

After competitor Kite Pharma (NASDAQ: KITE) reported solid efficacy for its chimeric antigen receptor T-cell therapy, KTE-C19, Juno Therapeutics (JUNO) shares are rallying 10% at 11:30 a.m. EDT Tuesday. 

So what

Juno Therapeutics and Kite Pharma are in a foot-race to develop next-generation cancer drugs that work by re-engineering a patient's T-cells. These chimeric antigen receptor T-cell (CAR-T) therapies spot and destroy cancer cells by binding to CD19, a protein commonly expressed in B-cell cancers.

Juno Therapeutics' lead product candidate is JCAR015, which is being studied as a treatment for advanced cases of acute lymphoblastic leukemia, or ALL. JCAR015 has put up solid efficacy in early stage studies; however, a change to a patient preconditioning chemotherapy regimen earlier this year led to two patient deaths and a temporary halt of its phase 2 trial. The preconditioning regimen has since been changed and the trial has been restarted, but Juno Therapeutics timeline for a potential JCAR015 approval has been pushed back to 2018 from 2017 because of the stumble.

On Tuesday, Kite Pharma reported impressive interim results for KTE-C19, which works similarly to JCAR015, and that could suggest JCAR015's trials eventually pan out, too.

Overall, 39% of patients with chemorefractory aggressive diffuse large B-cell lymphoma, transformed follicular lymphoma, and primary mediastinal B-cell lymphoma responded to Kite Pharma's KTE-C19. To put that response rate into context, consider that the historical complete response rate for tough-to-treat patients with DLBCL is 8%.

Now what

JCAR015 and KTE-C19 use chemotherapy preconditioning regimens; however, KTE-C19's conditioning program uses lower doses of chemotherapy and that may be why its trial didn't suffer the same setback as Juno Therapeutics this year.

Assuming Juno Therapeutics change to JCAR015's preconditioning regimen gives it the right mix, it wouldn't surprise me if JCAR015 delivers similarly strong efficacy when results are reported next year. If so, then Juno Therapeutics could file for FDA approval of JCAR015 in 2017 and a commercial launch in acute lymphoblastic leukemia patients could occur in 2018.

While KTE-C19 and JCAR015 are targeting different patient populations with their drugs initially, studies are under way at both companies that will eventually put them in competition with one another. It's impossible to guess which will eventually come out on top in CAR-T, but the market could be big enough to support both players. If so, then Tuesday's investor optimism isn't misplaced.