Why Gilead Could Take Out Juno But Face Major Competition From This Biotech Giant

Why Gilead Could Take Out Juno But Face Major Competition From This Biotech Giant
August 30, 2017
By Mark Terry, BioSpace.com Breaking News Staff

Investors, apparently excited about Gilead’s acquisition of CAR-T company Kite Pharma, have driven up share prices on other CAR-T companies, notably Juno Therapeutics. Might there be more acquisitions in the space in the near-future?

On Monday, Gilead announced a deal to buy Kite Pharma for about $11.9 billion. Best known for its hepatitis C franchise, the Kite acquisition launches it deeply into the immuno-oncology (IO) world. In May, the U.S. Food and Drug Administration (FDA) granted Kite priority review for its CAR-T therapeutic, axicabtagene ciloleucel. A decision date for the drug for refractory aggressive non-Hodgkin lymphoma (NHL) is expected Nov. 29.

After that news, climbed to $43.81 before dropping slightly to a current price of $41.74.

But Juno wasn’t alone in the boost. Other companies working in the space, including Bluebird Bio (BLUE) and Cellectis (CLLS) also surged.

This has analysts and investors speculating on whether Gilead might try to dominate the market and acquire Juno. Or, in a similar vein, since Celgene (CELG) already owns 10 or 11 percent of Juno, will the big cancer company lock in on that portion of the market?

George Budwell, writing for The Motley Fool, notes that Gilead has about $24 billion in cash left after the Kite deal, so it could potentially take a shot at Juno. He writes, however, “The fact of the matter is that Juno may not even be a top acquisition target in the CAR-T space at this point. Other companies, after all, arguably sport more potent and safer adoptive cell therapy platforms than Juno, along with far cheaper valuations due to their lack of a deep-pocketed partner. As an added kicker, Celgene also has other adoptive cell therapy licensing deals in place that might lower its interest in plowing ahead with a buyout of Juno right now.”

Also, Kite’s looking at a CAR-T approval in the next couple months, while Juno is at least a year from approval for its lead candidate, JCAR017. A Kite acquisition makes sense; Juno, not so much.

Dane Leone, an analyst with BTIG, agrees, writing in a note to investors, “We would be surprised if Celgene felt compelled to fully acquire Juno: Celgene owns ~10 percent of Juno’s current shares outstanding and has opt-in rights for development of the CD19 program outside of the United States and China. During March 2017, Celgene did exercise its top-up right to maintain its ownership stake, and purchased ~75k shares. That said, at this juncture with emerging overlap in Multiple Myeloma and third-to-market status in CD19 hematological malignancies, we struggle to find a rationale for Celgene wanting to fully own Juno.”

Although investors clearly were jumping on a bandwagon, neither Budwell nor Leone recommending investors continue, at least not aggressively. Budwell writes, “Juno has yet to reach the stage where a buyout makes a lot of sense for either a suitor or the company’s shareholders. As such, it may not be a great idea to buy Juno’s stock today based on turning a quick profit on a buyout offer.”

Leone expressed skepticism about Juno’s competitive positioning, but did adjust its rating from “Neutral” to “sell,” because “there is not a near-term catalyst to offset the positive tailwind for the entire CAR-T space.”

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