A major fiasco made 2016 a tough year to be a Juno Therapeutics (JUNO +0.00%) shareholder. Shares of the clinical-stage biotech have fallen about 32% over the past 12 months. In contrast, its well-established industry peer Incyte (INCY 0.92%) can boast a string of positives that pushed its stock about 64% higher over the same time frame.
Let's look at some opportunities and challenges facing both biotechs to see which stock is the better pick right now.
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Arguments for Juno Therapeutics
Less than a year ago, investors had reason to believe this would be the first of several companies to advance an exciting new class of cancer therapies from clinical trials into the hands of clinical oncologists. Its candidates, which are basically immune cells reengineered to attack cancer, have generated some incredible responses for patients that had run out of available treatment options.
Unfortunately, the deaths of several patients undergoing treatment with its lead candidate, JCAR015, dashed hopes that it might have earned an approval early next year. Now it appears that Kite Pharma (NASDAQ: KITE) will be first in line with a similar therapy. Juno's competitor expects to complete a rolling submission to the FDA for Axi-Cel (formerly KTE-C19) by the end of March for the treatment of diffuse large B-cell lymphoma.
Juno probably won't win a checkered flag, but its progress is still worthy of attention. Its new lead candidate, JCAR017, aims for the same cancer cell target as its ill-fated predecessor, but a few tweaks could improve its safety profile.
On the efficacy side of the equation, JCAR017 sure looks like a winner in the diffuse large B-cell lymphoma indication. In a group of patients that had relapsed after a median of four lines of prior therapy, JCAR017 drove eight of 19 patients' disease into complete remission for at least three months. Eliciting a response in any patients this heavily pretreated would be noteworthy, but these results are nothing short of incredible.
Juno intends to begin a larger trial with JCAR017 later this year, which could lead to an approval in early 2018 if all goes well. A successful commercial launch could lead to peak annual sales of around $2 billion for this candidate. With an enterprise value of just $1.6 billion at recent prices, further hints of success for this biotech's new lead candidate could send the stock soaring in the months ahead.
Arguments for Incyte
In stark contrast to Juno, Incyte has commercial-stage drugs, and the company's top line passed the $1 billion mark for the first time last year. Total revenue reported for 2016 bounded up 47% over 2015 figures to $1.1 billion due in large part to success with Jakafi, a rare bone marrow disease treatment.
Geron has a new drug candidate that could eventually pressure Jakafi. For now, Incyte expects annual sales of its lead drug to climb from $852.8 million last year to around $2 billion at its peak, if it can earn another approval for the treatment of graft-vs-host disease.
Jakafi is just one of several reasons to keep your eyes on Incyte. A recent approval of Olumiant in the EU is a big step forward for a candidate developed and marketed in partnership with Eli Lilly. The rheumatoid arthritis therapy outperformed Humira (a leader in the space and the world's best-selling drug) in a head-to-head trial. At the moment, the partners await an FDA approval decision that the regulator pushed back by few months. If given a green light, which is widely expected around the end of March, the drug could go on to generate about $1.8 billion in sales each year for the partners.
Further out, a partnership with Merck could bear fruit in the form of a combination therapy for newly diagnosed melanoma patients. The partners have already reported encouraging data from a study with Incyte's epacadostat and Keytruda, Merck's blockbuster cancer immunotherapy. If results from a larger trial fall in line with previous observations, Incyte could find itself with three drugs generating over $1 billion in annual sales within several years.
The better buy
Recently, Incyte shares have been trading hands at about 23.5 times last year's total revenue. Such a high price suggests that a great deal of success for Jakafi, Olumiant, and epacadostat is already baked in. If one or more of these should stumble, the stock could take a big hit.
Incyte is hardly a low-risk stock at recent prices, but at least it has multiple commercial-stage drugs generating sales right now. If all goes well, Juno Therapeutics could begin recording sales in 2018, but last year's mishaps have shown us that a lot can go wrong when you rework a patient's own immune cells to battle their cancer.
There's also well-founded concern that Juno's therapies could earn approval only to flop in the commercial stage. Extracting, modifying, then reintroducing immune cells is a complicated affair for all parties involved, and cell-based cancer therapies have a troubled past.
If Incyte weren't trading at such a high price, it would take the cake in this matchup. With an enterprise value below peak annual sales potential of a promising new drug, though, it looks like Juno Therapeutics offers far more upside potential over the next several years. That makes it the better biotech stock to buy right now.
