Celgene Corp (NASDAQ:CELG) loves cozying up to emerging biotech stocks working on next-generation medicine, and one of those collaborations is with Jounce Therapeutics (NASDAQ:JNCE). Celgene inked a research-collaboration deal with Jounce in July 2016, handing over $225 million up-front to gain rights to Jounce's research into immune-oncology drugs, plus $36 million as an equity investment.

Will that end up being money well spent? We'll get insight early in 2018.

What's this company doing?

Jounce Therapeutics is in the phase 2 study portion of their phase 1/2 study of JTX-2011, a monoclonal antibody that binds to and activates the Inducible T cell CO-Stimulator (ICOS), a protein on the surface of certain T cells that may stimulate an immune response against cancer.

Scientists working together at a table inside a laboratory.


The company's studying JTX-2011 for use in combination with Bristol-Myers Squibb's (NYSE:BMY) Opdivo, a PD-1 drug that helps prevent cancer cells from evading detection by the immune system. The two-drug combination is being evaluated in six different solid-tumor cancers, including non-small cell lung-cancer patients who are resistant to PD-1 therapy.

While PD-1 immunotherapies help many people, they don't work in every patient, especially patients that express PD-1 at low levels. Jounce's JTX-011 may help improve outcomes for solid-tumor cancer patients because:

  • Activating ICOS increases the number of T-cells that can fight cancer.
  • Binding to regulatory T-cells that dampen immune system response can reduce their number and improve the immune system's effectiveness.

What should investors know?

Since all of the patients participating in Jounce Therapeutics' trial have advanced disease and they're either refractory to PD-1 or express PD-1 at low levels, a positive showing for JTX-011 could suggest it addresses a big unmet need for new solid-tumor treatments. The Food and Drug Administration (FDA) has expressed a willingness to expedite the review of cancer drugs for this tough-to-treat cancer population, so if JTX-011 is safe and effective in phase 2, it could end up on a regulatory fast track.

Although management doesn't plan on releasing all of the data from its phase 2 trial at the same time, it does plan on releasing data from at least some patient cohorts in the first half of 2018. It hasn't specified the exact timing, but it would make sense for this data to come out in time to allow it to be presented at the influential American Society of Clinical Oncology meeting next June.

A person using a tablet displaying an upwardly ascending bar chart.


Is this stock worth buying?

It's too early in development to draw any conclusions about the likelihood of Jounce's phase 2 trials succeeding, or if they do succeed, if the data will be good enough to allow it to skip some clinical-trial checkpoints to get to market more quickly. For this reason, valuing the stock is a guessing game.

Celgene's involvement gives the company a deep-pocketed, highly experienced partner, though, and with $283 million on its balance sheet, Jounce Therapeutics says it has the financial flexibility to get itself through the next two years. If the company's calculations are correct, investors might not have to worry about a dilutive stock offering prior to the release of JTX-011 data next year.

Overall, Jounce is a high-risk, high-reward stock that's probably best left to very aggressive investors. If JTX-011 succeeds, then shares are likely to rally sharply higher; if it doesn't, then it could mean going back to the drawing board -- and that wouldn't be good news for investors.