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Better Buy: Celldex Therapeutics, Inc. vs. Juno Therapeutics

By George Budwell - Jul 19, 2017 at 6:30AM

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Which of these two beaten-down cancer stocks is the more compelling comeback story?

Celldex Therapeutics (CLDX -6.48%) and Juno Therapeutics (JUNO) are both once-promising clinical-stage biotechs that have fallen on extremely hard times of late. Over the past two and half years, for example, these former stars have each lost a staggering amount of their value:

JUNO Chart

JUNO data by YCharts

The silver lining is that neither Celldex nor Juno is anywhere near a total collapse, meaning there's still hope that these developmental biotechs can eventually blaze a comeback trail. With this in mind, let's consider which stock is more likely to return to form and perhaps transform into a top dog in their respective field. 

Celldex: The clock is ticking

Celldex's implosion was sparked by the failure last year of its experimental brain-cancer vaccine, dubbed Rintega. The odd part is that Rintega arguably never stood much of a chance in this devastating indication. A number of experimental drugs, after all, have been assessed in this particularly aggressive form of brain cancer, and almost nothing positive has emerged from these substantial efforts thus far.

The point is that the market probably shouldn't have built in much of a premium into Celldex's valuation based on Rintega's prospects in the first place, nor should it continue to penalize the company for this single clinical setback. Celldex, after all, sports a promising antibody-drug conjugate in glembatumumab vedotin, or glemba, that's currently in a midstage trial for triple-negative breast cancer, and its immune-boosting drug candidate, varlilumab, is being assessed alongside Bristol-Myers Squibb's potent checkpoint inhibitor, Opdivo, in a handful of solid tumors.

These two high-value anti-cancer agents easily justify the company's paltry market cap of approximately $300 million based on their commercial potential -- underscoring the market's dire outlook for Celldex's broader pipeline following the Rintega episode. 

Having said that, Celldex could be facing a cash crunch in the not-so-distant future. In the most recent quarter, for instance, the company reported $167 million remaining in its coffers. That amount simply isn't sufficient to undertake glemba's commercial launch if an accelerated regulatory filing is warranted, nor is it enough to advance the drug into a costly late-stage trial in the event further studies are required. 

Juno: Too little, too late?

Juno, in many ways, is a pioneer, and that's always a risky proposition for early investors. While the company's cell-based cancer therapies could end up forming a third major class of anti-cancer agents -- in addition to small-molecule drugs and antibody-based therapies -- Juno's initial efforts have been plagued by serious side effects that have resulted in a handful of patient deaths. In fact, the company was forced last year to suspend the development of its lead candidate, JCAR015 -- a type of treatment known as a chimeric antigen receptor T-cell therapy (CAR-T) -- because of safety concerns.

That's tremendously disappointing, because JCAR015 appeared to be on track to become a game-changing option for adult patients with acute lymphoblastic leukemia. Moreover, JCAR015 was Juno's best shot at keeping pace with rivals Kite Pharma and Novartis in the race to gain the all-important first-mover advantage in the CAR-T space. The biotech's hopes now rest on its next-generation CAR-T product candidate, JCAR017, as a treatment for non-Hodgkin lymphoma. 

If all the puzzle pieces fall into place, Juno estimates that it can close the gap with Kite and Novartis by perhaps early 2018 by launching JCAR017. That's a tall order, but not beyond the realm of possibility. 

The good news is that Juno does have an exceptionally strong cash position by virtue of its partnership with biotech heavyweight Celgene. So in a worst-case scenario where JCAR017 also flames out, the company does offer some downside protection in the form of its $700 million-plus cash balance. 

Two scientists work side by side with lab equipment in a clinic.

Image source: Getty Images.

Which stock is the better buy? 

In this head-to-head match-up of clinical-stage oncology companies, Juno is arguably the better play for two reasons. First off, cell-based therapies truly do have some awe-inspiring commercial potential based on their ability to become disease-modifying forms of treatments for conditions where all other therapies have failed. That's an exceedingly rare value proposition.

Equally as important, though, Juno is in a far better financial position than Celldex. Even if Celldex does strike gold with glemba in the triple-negative breast cancer setting, after all, the company will almost certainly have to raise a sizable amount of capital. Juno, by contrast, should be able to continue its current clinical activities without having to tap the public markets for capital even if JCAR017 fails to live up to expectations. That's a key advantage that further tips the scales in favor of Juno over clinical-stage peer Celldex. 

George Budwell has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Celgene. The Motley Fool recommends Celldex Therapeutics and Juno Therapeutics. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Celldex Therapeutics, Inc. Stock Quote
Celldex Therapeutics, Inc.
$34.35 (-6.48%) $-2.38
Juno Therapeutics, Inc. Stock Quote
Juno Therapeutics, Inc.
Novartis AG Stock Quote
Novartis AG
$84.76 (-0.54%) $0.46
Celgene Corporation Stock Quote
Celgene Corporation
Bristol Myers Squibb Company Stock Quote
Bristol Myers Squibb Company
$73.88 (-0.91%) $0.68

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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