What happened
Shares of Juno Therapeutics (JUNO +0.00%) are up by double digits for the second day in a row on extremely heavy volume. The catalyst behind this continued surge higher is the nearly $12 billion buyout of rival adoptive cell therapy company Kite Pharma (NASDAQ: KITE) by Gilead Sciences (GILD +0.39%) yesterday.
As of 1:26 p.m. EDT, investors have already bid up Juno's shares by another 18%. If this sizable move northward holds -- and all signs indicate that it will -- Juno's shares will end up gaining 40% in just the first two trading sessions of this week.
Image source: Getty Images.
So what
Juno's stock is presumably surging higher in anticipation of a healthy buyout offer from either Gilead or perhaps its biggest partner, Celgene Corp. (CELG +0.00%). As a refresher, Celgene currently owns about 10% of Juno's outstanding shares as part of the $1 billion CAR-T and TCR development deal the two companies signed back in 2015.
Investors seem to be betting that Celgene might step in to buy the rest of Juno in order to block Gilead from building an overwhelming lead in the high-value CAR-T space. Gilead, for its part, does tend to like building out drug franchises that gobble up a disproportionate amount of the market, implying that management might aggressively pursue other adoptive cell therapy pipelines. Moreover, Gilead still has over $24 billion in cash remaining to pursue additional deals in the CAR-T arena.
Now what
Whether a deal is imminent or not is a total unknown, however. The fact of the matter is that Juno may not even be a top acquisition target in the CAR-T space at this point. Other companies, after all, arguably sport more potent and safer adoptive cell therapy platforms than Juno, along with far cheaper valuations due to their lack of a deep-pocketed partner. As an added kicker, Celgene also has other adoptive cell therapy licensing deals in place that might lower its interest in plowing ahead with a buyout of Juno right now.
Juno's ginormous move higher over the past two days is based purely on speculation that's being fueled by Gilead's buyout of Kite yesterday. Unfortunately, there's no compelling reason to think that Juno is also a buyout target. Kite, after all, is barreling toward a regulatory approval for its CAR-T product candidate Axi-Cel, whereas Juno is still a year or so away from even reaching this critical stage with its lead product candidate, JCAR017.
In other words, Kite is a far less risky acquisition target than Juno at this juncture, which is presumably why Gilead was willing to pay top dollar. Juno's management, on the other hand, would likely have to sell the company at a significant discount because it lacks a product currently under regulatory review. Juno has yet to reach the stage where a buyout makes a lot of sense for either a suitor or the company's shareholders. As such, it may not be a great idea to buy Juno's stock today based on turning a quick profit on a buyout offer.
