With shares of Janux Therapeutics (JANX 0.62%) exploding upward to a high of more than 222% above its prior closing price on Feb. 27, it is no great shock that many investors are wondering whether the stock is still worth buying. The market is interpreting the pre-revenue biotech's hot-off-the-press phase 1a clinical trial results as a massive victory. With such early data in hand, there's likely more upside on the way over the next few years as its programs mature -- or so the logic goes.
But one of the iron laws of drug development is that most attempts to develop a new medicine fail somewhere along the way, and this company still has a very long way to go before it has a chance to make even a dollar in sales. Risks will remain high for quite some time. So is this stock a buy, or is it still too risky to touch?
Early data suggests something that could be big
Before we discuss the clinical trial data responsible for the stock's blastoff, let's quickly put Janux in its proper context as a biotech stock by appreciating the technical advantages it could have.
Per its technology platform, its clinical-stage pipeline programs are called tumor activated T-cell engagers, or TRACTrs for short. You can think of TRACTrs as little molecular contraptions that aim to tether a person's naturally occurring tumor-killing T-cells directly to the tumor cells in their body. At the same time, they stimulate the body's defenders into a frenzy, dramatically increasing the intensity of the cells' anti-tumor activity to beyond what is considered normal.
Such ideas are not new, and many other companies are pursuing similar approaches, including major players like Amgen. But TRACTrs have a distinctive feature that could be decisive in the clinic.
Overstimulating anti-cancer T-cells can be deadly for patients even if they do the trick against their intended foes. The trouble is that once they're whipped up into the frenzy mentioned above, it's very difficult for them to de-escalate their secretion of potent chemical signals that tend to wreak havoc on nearby innocent cells.
To address that problem, the biotech's technology includes three safety features that can only be disarmed by the reflexive actions of the tumor cells that are in the inner areas of tumors (also known as the tumor microenvironment). Once those safeties are disarmed, another happy consequence is that if the TRACTrs escape the tumor microenvironment, the body's custodians can easily break them down and ensure they don't accumulate and continue to stimulate the T-cells. Thus, where competitors are likely to significantly struggle with finding a balance between the effective dose of their candidate versus the dose that's safe for patients to be treated with, Janux might not, and that's one big reason why it could be an exciting investment.
Importantly, the latest set of preliminary phase 1a clinical trial data from two of its trials supports the idea that the company's tech is useful.
JANX007 is intended to treat metastatic prostate cancer (mCRPC), whereas JANX008 is seeking an indication for treating solid tumors. Patients in both trials had already undergone multiple rounds of treatment with other therapies without success.
In the JANX007 trial, 56% of the patients experienced a decline of at least 50% in the level of a prostate cancer-related biomarker called PSA after treatment with the lower of the two tested doses. In the JANX008 trial, at least two patients experienced significant reductions in the size of their tumors. So far, both trials show favorable safety indicators, although this may change as more patients receive doses and higher dosages are tested.
In other words, the first look at Janux's data is very positive, and there is some preliminary evidence that its TRACTrs can work as advertised.
But is it a good investment?
With a key early validation of Janux's platform in hand, investors will need to wait for more data for the stock to have another chance to rise sharply again. There's no guarantee that the next sets of data will be as good. Assuming that they are, can the company's means support its ambitions?
For now, yes. With $350 million in cash, cash equivalents, and marketable investments, and trailing-12-month (TTM) operating expenses of $84 million, Janux has solid financial resources for the near term. Management claims it has the cash to last through 2027.
Still, investors should be aware that its research and development (R&D) expenditures will certainly rise as it advances its candidates into the middle stages of the clinical trials process, which nearly always feature larger cohorts of patients as well as frequently require longer monitoring periods than Phase 1 studies. Expect Janux to need to raise money by issuing new stock or taking out more debt sometime in the next three years.
Overall, Janux is in very good shape for a biotech at its stage of development. If you're willing to accept that it'll likely be years before it reaches the market with any therapy, and that you may lose most or all of your money if it fails to do so, it's worth buying right now. For everyone else, this is a very risky stock, even if the early testing results look solid.
