Today’s not a great day to be a Juno Therapeutics Inc (NASDAQ:JUNO) shareholder.
That’s because JUNO stock is down a hefty 30%-plus following news that one of the key drugs in its pipeline may be responsible for two (and possibly three) recent deaths of patients in the drug’s trial.
While the FDA’s official “hold” on the therapy’s trial doesn’t inherently mean it will never be usable, it does send an alarming message to the market.
Investors are asking questions, of course, with “what exactly happened?” and “now what?” topping the list. The former question is easy enough to answer. The latter, however, isn’t quite as clear.
Juno Therapeutics Hits a Wall
The drug in question is JCAR015, for the treatment of leukemia. It’s one of a handful of new treatment categorized as CAR-T, or chimeric antigen receptor T cells, which essentially are immune cells re-engineered to better fight a specific disease.
In this particular case, the target was relapsed or refractory B cell acute lymphoblastic leukemia.
The drug itself has shown enough promise to be in phase 2 trials. In fact, it doesn’t appear to be JCAR015 that specifically caused last week’s death of two of the twenty patients enrolled in the study; brain swelling turned fatal. (The third passed away a few weeks ago for then-unclear reasons.)
Rather, the culprit appears to be one of the two pre-treatment chemotherapy drugs administrated before JCAR015 is applied in order to make the CAR-T approach more effective. When the so-called Rocket trial only primed the patient with cyclophosphamide, no unexpected issues have surfaced. Adding fludarabine to the pre-treatment mix, however, was part of the preparation process for both patients who died last week.
Fludarabine has not been confirmed as the core cause of the deaths, but it’s the most plausible line at this time. To that end, Juno Therapeutics has proposed to the FDA that it drop fludarabine from the pre-treatment regimen.
The FDA’s hold effectively sends JCAR015 back at least a couple of steps. The biotech outfit was counting on a 2017 approval, but that’s been pushed back to 2018 … if it ever happens at all. Fludarabine may have been the necessary pre-treatment needed to make JCAR015 more effective and/or less risky than current forms of AML treatment.
This uncertainty was enough for JPMorgan analysts to downgrade JUNO from an “overweight” to “neutral,” simultaneously lowering its target price on JUNO stock from $63 to $39.
JPMorgan’s analyst note explained:
“The company is taking steps to get ROCKET restarted ASAP by going back to pre-conditioning with cyclophosphamide alone. On the one hand, this does appear to be isolated to JCAR 015, and management is confident it won’t have a collateral impact on the other programs… [but] We’d be more comfortable if the mechanism behind the neurotoxicity was better understood. Bottom line, we still have high hopes for JUNO’s CAR-T platform, but given the near/medium term uncertainty, we see better opportunities elsewhere in our universe.”
On the other hand, never say never. According to Forbes, the American Cancer Society’s chief medical officer Otis Brawley has “seen clinical holds resolved in the past, including with important drugs like Taxol. … the fact that the deaths seem so clearly linked with fludarabine is a good sign.”
Bottom Line for JUNO Stock
While the news of the JCAR015 deaths is jarring, the tumble JUNO shares are suffering today may be excessive, and therefore a speculative buying opportunity.
While JCAR015 was the de facto flagship drug because it was further along the development path than any other Juno Therapeutics drug, as a Phase 2 drug it was still far from a sure thing. Moreover, Juno has still got nine other drugs in the works, and it does indeed look as if removing fludarabine from the pre-treatment package will make a difference.
On the flipside, the one thing worse than a biotech company failing to come up with a marketable drug is a biotech company disappointing the market by failing to live up to expectations. Brawley was right — investors have seen such hurdles overcome before.
Once a stock burns traders though, they aren’t as quick to set themselves for the same disappointment again. JUNO just became a “show me first” stock.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
