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Why Juno Therapeutics Fell 11% Today

By Brian Orelli, PhD - Sep 21, 2015 at 5:44PM

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Investors are spooked about drug pricing.

What's happening: Juno Therapeutics (JUNO) was doing just fine this morning, trading slightly below where it closed on Friday, until just after 11 a.m. Eastern when Democrat Presidential candidate Hillary Clinton sent out this tweet.

Price gouging like this in the specialty drug market is outrageous. Tomorrow I'll lay out a plan to take it on. -H https://t.co/9Z0Aw7aI6h

— Hillary Clinton (@HillaryClinton) September 21, 2015

Like many other biotechs, Juno Therapeutics fell on the news throughout the day, eventually ending down a hair below 11%.

Why it's happening: Juno Therapeutics was down more than the SPDR S&P Biotech ETF (XBI), which slipped just 5.4%, because of the type of drugs the biotech is developing. Juno's CAR-T therapeutics require the removal of a cancer patient's immune cells, selection and activation of the cells, and gene transfer to train the cells to attack the patient's tumor. At that point, the cells are grown in an incubator until there are enough to put back into the patient.

Source: Juno Therapeutics.

This is a personalized process for each patient; therefore, the company is going to have to charge a lot to recoup the manufacturing cost. CAR-T therapeutics aren't going to have the typical high margins that come with most pharmaceutical drugs. If the government puts pricing controls on drugs, it may be difficult for Juno Therapeutics, and the rest of the companies developing CAR-T therapeutics, to profit from the therapies if the drugs are eventually approved by the Food and Drug Administration.

Of course, a plan by a Presidential candidate is far from a law. And later in the day, Reuters reported that Clinton's plan will include a cap on patients' monthly out-of-pocket expenses for specialty drugs, which would be less of an issue for drugmakers than a cap on the price companies could charge insurance companies.

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