What happened
Shares of the clinical-stage biotech Juno Therapeutics (JUNO +0.00%) rose by a healthy 22% last month, according to S&P Global Market Intelligence. The drugmaker's shares seemed to get a lift from two different catalysts during the month.
First off, the company provided yet another positive clinical update for its lead cell therapy, JCAR017, in relapsed and refractory aggressive B cell non-Hodgkin lymphoma (NHL) at the 2017 International Conference on Malignant Lymphoma in Lugano, Switzerland.
Image source: Getty Images.
Secondly, Juno and its fellow CAR-T developers Kite Pharma (NASDAQ: KITE) and Novartis (NVS 0.55%) all got a boost from the news that President Trump reportedly won't pursue hard-caps on prescription drug prices.
So what
Juno needs to strike gold with JCAR017 sooner rather than later. After all, the lead therapies of Kite Pharma and Novartis both appear to be on track to gain the first marketing approvals for adoptive cell therapies inside the United States. So, it's absolutely crucial that JCAR017 continues to make steady progress in the clinic.
Digging into the details, Novartis just received a unanimous recommendation from the U.S. Food and Drug Administration yesterday for its CAR-T product candidate, tisagenlecleucel, indicated for patients ages 3 to 25 with relapsed B-cell acute lymphoblastic leukemia (ALL). And Kite Pharma is hoping to follow in Novartis' footsteps soon with its own CAR-T therapy dubbed "Axi-Cel" as a potential later line treatment for aggressive non-Hodgkin lymphoma later this year.
On the drug pricing front, Juno, Kite, and Novartis all appear primed to benefit from President Trump's 180-degree turn on this hot-button issue because these promising adoptive cell therapies are expected to come with some truly astounding price tags.
Even though Novartis' tisagenlecleucel has yet to get the final green light from regulators, for instance, analysts have already suggested that it may cost something along the lines of $300,000 per infusion, and perhaps higher. Kite, for its part, is expected to follow suit and price Axi-Cel in the range of $200,000 to $300,000 per treatment, according to Jefferies analysts.
Now what
Juno's goal is to hit the market with JCAR017 in 2018, but a more realistic time is perhaps 2019. Regardless of the exact timing, Juno's therapy seems to be headed toward becoming the third CAR-T product on the market -- behind Novartis' tisagenlecleucel and Kite's Axi-Cel, respectively. As such, JCAR017 is going to need to show that it's either far safer or more potent than its rivals to carve out a profitable niche, and reach the company's estimated $1 billion in peak sales.
While the jury is still out on JCAR017's ultimate fate either clinically or commercially speaking, the breaking news that Novartis' therapy breezed through its advisory committee meeting yesterday is an extremely positive development for all three companies.
Because of the serious and potentially deadly side effects associated with these treatments -- such as cytokine release syndrome, there was the real danger that this panel of experts wouldn't look favorably upon Novartis' experimental CAR-T therapy heading into this review. However, this unanimous decision seems to indicate that industry insides do have a favorable view of the risk-to-reward ratio of CAR-Ts in general -- despite the known risk of potential fatalities. As such, a major barrier appears to have been cleared for both Kite and Juno moving forward.
Image source: Getty Images.
Does this mean that Juno's stock is a compelling buy? Unfortunately, the answer to this question is a "maybe" at best. Novartis and Kite's first-mover products still have a lot to prove in terms of their ability to be produced at scale, safely, and in a timely fashion. Juno is obviously facing these very same hurdles to successfully commercializing a genetically modified cell therapy.
Moreover, there's the substantial risk that the regulatory landscape may take a turn for worse if either Kite or Novartis' first-mover products start causing an unexpected number of fatalities once they begin to be used in a real world setting. In that case, Juno would most probably end up being penalized for the sins of its peers (i.e., the bar for approval may jump markedly if real world deaths start mounting from CAR-Ts already on the market).
All told, Juno is definitely an attractive cutting-edge oncology company that could produce enormous returns for early investors. But this emerging field is still in its infancy, meaning Juno isn't a stock suitable for risk-adverse investors.
