Image Source: Juno Therapeutics

Juno Therapeutics (NASDAQ: JUNO) and bluebird bio (NASDAQ:BLUE) seem to have quite a bit in common. Both are clinical-stage biotechs with several pipeline candidates. Both have chimeric antigen receptor (CAR) T cell therapies in development. And both have attracted the attention of the same big biotech -- Celgene (NASDAQ:CELG). But the similarities go only so far, which is why one of these biotech stocks presents a better opportunity for investors.

The case for Juno Therapeutics

There's no question that Juno has emerged as one of the leaders in development of CAR T therapies. Its lead candidate, JCAR015, is currently in a phase 2 clinical trial targeting treatment of relapsed/refractory acute lymphoblastic leukemia (ALL). The company thinks that JCAR015 could win regulatory approval as early as 2017.

In addition to JCAR015, Juno has several other CAR T drugs in its pipeline that target CD19, a B-lymphocyte antigen. JCAR014 is currently in a phase 1/2 study focusing on adult B cell malignancies. JCAR017 is in a phase 1/2 study targeting treatment of pediatric ALL and is in a phase 1 study focused on adult non-Hodgkins lymphoma.

Juno's pipeline also includes another CAR T therapy, JCAR018, which targets CD22. Like CD19, CD22 is a B-lymphocyte antigen present on most B cell malignancies, including ALL and non-Hodgkin lymphoma.

How much potential do these CD19 and CD22 programs have? Consider that Celgene spent $1 billion last year on a 10-year collaboration that gives the big biotech options for the drugs. In April, Celgene exercised its option to develop and market Juno's CD19 program outside of the U.S. and China -- a major signal of how valuable Celgene thinks the opportunity could be.

Thanks in large part to the Celgene relationship, Juno is in great shape financially. The company reported cash and equivelents of $947 million as of the end of first quarter. That's enough to carry Juno through the next few years without any need to raise more cash.

The case for bluebird bio

What about bluebird? The small biotech claims two lead candidates in phase 2/3 testing. Lenti-D targets treatment of cerebral adrenoleukodystrophy, while LentiGlobin targets transfusion-dependent beta-thalassemia. LentiGlobin is also in a phase 1 clinical study for severe sickle cell disease.

Of these two drugs, LentiGlobin presents the bigger opportunity for bluebird. Around 15,000 patients in the U.S. and Europe have beta-thalassemia, much larger than the number of individuals with cerebral adrenoleukodystrophy.Analysts think that LentiGlobin could hit peak annual sales of around $1 billion for the beta-thalassemia indication. If the drug proves effective in treating sickle cell disease, the stakes get much higher, with peak annual sales estimates of $3 billion.

Then there's bluebird's CAR T program. Celgene and bluebird first teamed up in 2013 to apply gene therapy to genetically modify CAR T cells. In June 2015, the two companies modified their collaboration to focus only on developing product candidates targeting B-cell maturation antigen.

Like Juno, bluebird appears to be in solid financial shape. The company ended the first quarter with $553 million in cash and equivalents. Bluebird expects that amount will be enough to carry it through 2018. 

Better buy

Which of these biotech stocks is the better buy? I'd follow the lead of Benjamin Graham's Mr. Market and go with Juno Therapeutics. Many biotech stocks have suffered over the past year, but the market has been much kinder to Juno than bluebird. Juno's stock is down only 11% over the last 12 months, while bluebird has lost around 75% of its market cap.

I think a primary reason why Juno's stock fared better is that investors recognize the strong potential for the company's CD19 program. The implicit approval of Celgene adds to confidence in this pick.

As for bluebird, the big opportunity is for LentiGlobin with the sickle cell indication. However, any hopes for approval for sickle cell disease remain years away, making the stock's risk/reward profile less favorable. 

Celgene could be wrong about Juno. So could Mr. Market. However, I like the company's prospects over the next few years.