What: Shares of Juno Therapeutics (JUNO), a clinical-stage biopharmaceutical company focused on developing cancer immunotherapy products based on its CAR-T targeted technology, tumbled as much as 12% following the expiration of its lockup period.
So what: Lockup expirations aren't something that usually make a lot of news, but here's how they work. When a company goes public, as Juno Therapeutics did about six months ago, there's a 180-day period where insiders of the company aren't allowed to sell their shares. Additionally, when a company offers shares to the public for the first time, they typically only offer a small percentage of the available shares for trading. This can also increase demand for a stock and boost its share price.
In Juno's case, it offered just 11,022,917 shares when it priced at $24, although it carries 77,939,023 shares outstanding. These nearly 67 million additional shares are released for trading once the 180 days is up -- which happened today. Some view lockups as dilutive to existing shareholders (though they really aren't), but the bigger concern is that insiders can now cash in shares of their common stock. This clearly has investors bothered following a better than 100% return since its IPO pricing at $24.
Now what: Lockup expiration woes are rarely an event that's talked about for longer than a few days, so while Juno Therapeutics' shares are probably going to remain volatile, the event itself has no bearing on the company's business model or outlook. In other words, a lockup expiration isn't going to change your investing thesis.
The real question that investors need to be asking is if CAR-T based cancer immunotherapies are the wave of the future or just a "fad" within the drug discovery process. Honestly, it's hard to tell at this point because Juno Therapeutics' pipeline is so young. It has 10 identified compounds targeted at a mixture of blood cancers and solid tumors, but only six are in clinical studies, and of those, they're all phase 1 trials or phase 1/2 studies. We're going to need quite some time to get a true bead on whether or not Juno's approach is a winner, and as such, I'd suggest hanging out on the sidelines in the meantime.