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Here's Why Juno Therapeutics Stock May Still Be Worth Buying

By George Budwell – Oct 7, 2017 at 1:00PM

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Juno Therapeutics stock has been on the move as investors speculate on the next CAR-T buyout target. But there are other compelling reasons to own this stock right now.

What happened

Juno Therapeutics (JUNO), a clinical-stage adoptive cell therapy company, saw its shares rise by 7% last month, according to data from S&P Global Market Intelligence.

The biotech's shares have been edging higher lately primarily due to Gilead Sciences' (GILD 2.41%) $11.9 billion buyout of the rival adoptive cell therapy company Kite Pharma (NASDAQ: KITE), combined with the first-ever regulatory approval of a T cell transfer technology known as chimeric antigen receptor T-cell therapy, or CAR-T for short, with Novartis' Kymriah in late August.

Juno, as a leading CAR-T developer, has clearly been benefiting from this surge in interest from investors, with its shares gaining a healthy 60% in just the past two months. In short, investors appear to be betting that Juno might be the next buyout target by either Gilead or perhaps its main CAR-T development partner, Celgene Corporation

Human T-cell

Image source: Getty Images.

So what

While Kite and Juno are both developing genetically modified T-cell therapies designed to treat a variety of advanced forms of blood cancers, these two companies are currently in markedly different stages of their respective lifecycles. Kite, for instance, has already submitted its most advanced CAR-T candidate, axicabtagene ciloleucel, for approval with the U.S. Food and Drug Administration as a possible treatment for refractory aggressive non-Hodgkin lymphoma, and the therapy will also have the backing of biotech heavyweight Gilead moving forward.

Juno, on the other hand, is perhaps another year away from following suit with its lead CAR-T candidate, JCAR017, as a novel therapy for patients suffering from relapsed and refractory aggressive B cell non-Hodgkin lymphoma. So, Juno arguably isn't nearly as attractive of a buyout candidate as Kite at this stage in the game -- implying that investors should probably temper their expectations regarding a possible buyout scenario for the time being. 

Now what

The good news is that Juno is immensely well capitalized for a company with such a large and diverse clinical pipeline. Carrying out multiple trials at once, after all, isn't cheap, and developmental-stage companies frequently have to make hard choices regarding their pipeline as a result.

Turning to the specifics, Juno now sports over $1 billion in cash, cash equivalents, and short-term marketable securities after a recent $318.7 million capital raise (before deducting fees) -- which is easy enough to see JCAR017 through to a regulatory filing and perhaps a commercial launch as well. Juno also shouldn't have to delay the development of any of its other cell-based cancer therapies in light of its sizable cash position. 

That's an unusually strong financial position for a clinical-stage biotech in general, especially for a company with several megablockbuster candidates under development at once. So, while Juno isn't guaranteed a spot at the CAR-T table with JCAR017 -- or any of its other clinical candidates for that matter, the company is at least sitting comfortably from a capital structure standpoint.

The key takeaway is that Juno shouldn't need to execute any additional value-destroying secondary offers as its broad pipeline makes strides toward a possible regulatory filing next year. The same simply can't be said for some of Juno's closest competitors such as Bellicum Pharmaceuticals or Ziopharm Oncology, however. Bellicum, for instance, exited the most recent quarter with only $130 million remaining in cash, and Ziopharm didn't fare any better with a mere $97 million on its books at the end of last quarter. 

So, if you're looking for a CAR-T stock in the wake of Gilead's high-dollar acquisition of Kite, Juno may be worth checking out because of its ginormous financial advantage over the remaining field of clinical-stage companies. 

George Budwell has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Celgene and Gilead Sciences. The Motley Fool has the following options: short October 2017 $86 calls on Gilead Sciences. The Motley Fool recommends Juno Therapeutics. The Motley Fool has a disclosure policy.

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