$60 Million Juno Therapeutics Deal Pushes Fate Therapeutics Up 80% in Premarket Trading

Published: May 07, 2015

$60 Million Juno Deal Pushes Fate Therapeutics Up 80% in Premarket Trading
May 6, 2015
By Riley McDermid, BioSpace.com Breaking News Sr. Editor

Scrappy San Diego, Calif.-based biotech Fate Therapeutics surged more than 80 percent in pre-market trading Wednesday on news that the company has inked a $60 million deal with white-hot, recently IPO’d, CAR-T darling Juno Therapeutics .

The deal will have Fate study small molecules in an effort to boost Juno's genetically-engineered T cell product candidates and turbocharge their effectiveness against cancer.

Juno will pay Fate $5 million upfront and purchase one million shares of Fate common stock at $8 per share, as well as fund all mutual collaboration activities for an exclusive four-year research term.

“For each product developed by Juno that incorporates modulators identified through the collaboration, Fate is eligible to receive approximately $50 million in target selection fees and clinical, regulatory and commercial milestones, as well as low single-digit royalties on sales,” said the companies in a statement.

Under the terms of the deal announced today, during the four-year partnership, Fate will be responsible for screening and identifying small molecules that modulate the biological properties of engineered T cells. Juno will be responsible for the development and commercialization of engineered T cell immunotherapies that use Fate’s advances.

Juno also has the option to extend the deal for an additional two years, as long as it pays an undisclosed amount.

"A deep understanding of T cell biology is the basis of Juno's approach to creating best-in-class cellular immunotherapies," said Hans Bishop, chief executive officer of Juno Therapeutics. "Partnering with Fate Therapeutics, and accessing its strong science and leading platform for modulating the properties of immunological cells, enables interrogation of new avenues of T cell manipulation and provides an opportunity to enhance the therapeutic profile of our genetically-engineered T cell product candidates."

Through the four-year research and development collaboration, Fate will be responsible for screening and identifying small molecules that modulate the biological properties of engineered T cells. Juno will be responsible for the development and commercialization of engineered T cell immunotherapies incorporating Fate's small molecule modulators.

Juno has been growing by leaps and bounds. It said mid-March that it will look for new headquarters in Seattle, and will be looking for new hires well into 2015.

Juno has ballooned from 10 employees at the beginning of 2014 to 123 employees now and currently occupies 23,200 square feet of office and lab space at 307 Westlake Ave. N. in South Lake Union. A spokesman for Juno declined to specify where it might move or how much space it is hoping to find.

The gene therapy company briefly disappointed market watchers late Wednesday after its first earning report said the company expects to burn through at least $140 million in cash during its first year as a public firm, but its share price has since rebounded to a healthy $59.68 at Thursday's New York close.

"During the past year, we have made significant progress in building a world class science and clinical organization. We have leveraged our CAR and TCR technology platform to continue to develop cellular therapeutics with the potential to meaningfully improve the lives of patients with cancer," said Bishop, Juno's chief executive officer.

"Our successful rounds of private financing, together with our IPO, have provided us with the financial resources that we need to continue advancing our product candidates. Within the next 12 months, we expect to have 10 product candidates in clinical development directed at six different cancer-associated antigens."

As part of that massive growth, Juno said in a statement that it expects to burn between $125 million and $150 million in cash in 2015, excluding cash inflows or outflows from business development activities and ongoing litigation.

"Juno enters 2015 financially strong and prepared to support the initiation of clinical trials for multiple product candidates targeting an array of antigens, our planned Phase II trial of JCAR015, and other milestones," said Steven M. Harr, chief financial officer of Juno. "Our financial guidance for 2015 provides evidence of our commitment to patients and to investors to deliver on our business strategy, to spend prudently, and to invest in the innovation and development of therapies that re-engage the immune system to fight cancer."

Investors and Wall Street have been watching closely to see if the gene therapy company has been able to live up to its hype. Juno’s shares closed at $52.49 Monday, a major leap from its IPO price of $24, but down from its historic high of $61 a share, but significantly in early trading Thursday.

The company has seen ups and downs in its journey through the public markets. Juno surprised the analysts and investors alike in January when it announced it will have 10 therapeutic candidates for six different diseases in clinical trials by end of 2015, a massive push into the market that was unexpected by even its most bullish supporters.

Bishop told attendees at the J.P. Morgan Healthcare Conference that it has data for endogenous T cells that can reach cancer cells in all tissue types, with efficacy in high rate of response in patients.

Juno joined a long list of gene therapy biotechs attempting to IPO this year; the company uses human T cells to help fight cancer. Its main therapies are based on T Cell Receptors (TCR) and Chimeric Antigen Receptors (CAR) and include chimericantigen receptor drug candidates JCAR 014, JCAR015, and JCAR017.

Interim ASH data hasn’t quite shown an improved clinical profile for its experimental therapies -017, -014 with defined cell composition (CD4/8), but Bishop was excited about the company’s next-generation “armored" chimeric antigen receptors to combat the tumor microenvironment, specifically IL-2 secreting area. Juno has bispecific CARs that can regulate the tumor’s on/off switches, said Bishop.

“The real prize here is obviously success in solid tumors,” he told the audience.

Juno has been riding high since its initial public offering Dec. 19. The stock’s opening price was $24 per share, which skyrocketed $60 the first day of trading. The company adjusted its set price several times prior to the IPO, first filing with the U.S. Securities and Exchange Commission between $15 and $18, then updating to between $21 and $23.

Bishop alone raked in $100 million for his 3 percent. Other stakeholders include Robert Nelson, who made $450 million, and Seattle’s Fred Hutchinson Cancer Research Center, who pocketed a tidy $153.6 million.

In addition, two funds, CL Alaskan and JT Line Partners, have a combined 31 percent stake. Their portion of Juno is now worth more than $1 billion. The spinoff from Fred Hutchinson, Memorial Sloan-Kettering Cancer Center and Seattle Children’s Research Institute had Goldman, Sachs & Co., J.P. Morgan and Morgan Stanley as lead bookrunners on the deal.

The firm reported intriguing clinical trial results at the annual meeting of the American Society of Hematology on Dec. 8.

“The tumor response rates and duration observed in these ongoing studies remain encouraging as we advance our lead product candidates in hematological malignancies,” said Bishop at the time.

Juno's initial IPO filing showed it is aware of the market risks involved in taking a young company public, when huge swings in value can come from an enormous market open but quickly taper back.

“Our longer-term goal is to revolutionize medicine through the application of cell-based therapies,” the company writes in its SEC filing. “In particular, we believe that genetically-engineered T cells have the potential to meaningfully improve survival and quality of life."

Juno will need every penny of its IPO coffers and existing $314 million in venture funding from Arch Venture Partners, Amazon.com founder Jeff Bezos and largest stakeholder Alaska Permanent Fund, which owns 34 percent of the venture.

“Our very short history as an operating company makes any assessment of our future success or viability subject to significant uncertainty,” the company writes. “We will encounter risks and difficulties frequently experienced by early-stage companies in rapidly evolving fields. If we do not address these risks successfully, our business will suffer."

Earlier this winter the company beefed up its intellectual property portfolio by agreeing to pay Connecticut-based Opus Bio $20 million and 1.6 million shares of Juno stock in exchange for an exclusive license to patents and data related to various human monoclonal antibodies and their use in immunotherapy.

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