If You Love Exelixis, You Should Check Out Juno Therapeutics

By Keith Speights Markets Fool.com

Don't you wish you'd bought Exelixis (NASDAQ: EXEL) stock three years ago? The biotech's share price is up more than 460% since then, including more than 350% in just the past 12 months. Exelixisis, without question, one of the hottest biotech stocks around.

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Juno Therapeutics (NASDAQ: JUNO)isn't. Its stock is down more than 40% over the past 12 months, although things are looking up in 2017 so far. But if you love Exelixis, you really should check out Juno.

Image source: Getty Images.

Early setbacks

The U.S. Food and Drug Administration placed a clinical hold on Juno's then-lead candidate, JCAR015, in July 2016 after two patients died in a phase 2 study. Juno thought the issue might be the addition of fludarabine to the pre-conditioning regimen. A few days later, the FDA lifted the clinical hold after Juno changed its pre-conditioning to use onlycyclophosphamide.

It didn't take too long, however, for problems to reoccur. Juno announced in November that it had voluntarily placed the phase 2 study of JCAR015 on hold after another patient death. A second patient subsequently died. This time, the study didn't resume. Juno reported in March that it was throwing in the towel on JCAR015.

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Anyone thinking this was the end of the road for Juno Therapeutics only has to look back at Exelixis' history to understand that early setbacks don't rule out the possibility for later success. Granted, Exelixis didn't have any patient deaths in its clinical studies, but the biotech definitely ran into several significant roadblocks along the way.

Way back in 2007, a phase 2 study ended in a flop for Exelixis, which was working on a drug targeting diabetic nephropathy. The biotech subsequently discontinued research for the experimental drug.

Even Exelixis' tremendously successful Cabometyx (cabozantinib) experienced failure. In 2014, the biotech announced disappointing results from a late-stage study of the drug in treating prostate cancer. Not only did Exelixis give up on pursuing the prostate cancer indication, but it also slashed its workforce size by 70%.

Promising pipelines

Of course, the situation for Exelixis got much better over time. While Cabometyx didn't work well for prostate cancer, it was a completely different story for renal cell carcinoma, a form of kidney cancer.

It's possible that Juno could experience a similar reversal of fortune. Although JCAR015 is gone, the small biotech still has a solid pipeline, with seven experimental cancer drugs. Juno's chimeric antigen receptor T-cell (CAR-T) program remains strong, with a registrational study of JCAR017 starting up this year.

As with JCAR015, the approach with JCAR017 is to first remove T-cells from the patient. These cells are then genetically modified to express achimeric antigen receptor (CAR). The CAR enables the T-cell to recognize CD19, a protein on the surface of the cancer cell in patients with CD19+ leukemia. The CAR-T cell then kills the cancer cell.

So why wouldn't JCAR017 have the same issues as JCAR015? Although they're both CAR-T therapies targeting CD19, JCAR017 is engineered quite differently than JCAR015. There have been no reported deaths in any clinical studies of JCAR017.

Juno also is researching JCAR014, which is constructed in a similar method as JCAR017. The experimental drug is being evaluated in a phase 1 study in combination with durvalumab. Juno also plans to initiate a study this year with JCAR017 combined with Imbruvica in treating chronic lymphocytic leukemia.

Just as Exelixis attracted the attention of a big drugmaker, Roche, with cabozantinib, Juno's pipeline potential has allowed it to pick up a major partner. In April 2016, Celgene (NASDAQ: CELG) exercised its option to market the small biotech's CD19 program outside North America and China.

Looking ahead

Thanks in no small part to its relationship with Celgene, Juno claims an enviable financial position for a clinical-stage biotech. The company reported $922.3 millionin cash, cash equivalents, and marketable securities at the end of 2016.

This cash stockpile should allow Juno to continue advancing its clinical program. The most important thing to watch is the biotech's study of JCAR017 in treating non-Hodgkin lymphoma (NHL). If all goes well, Juno could potentially receive U.S. regulatory approval for the drug in the NHL indication as early as 2018. Celgene would be responsible for securing potential European regulatory approval.

Can Juno eventually become as successful as Exelixis? It's too early to know for sure, but there's definitely a chance that Juno could emerge as a leader in the treatment of multiple forms of leukemia and possibly other types of cancer. That might seem like wishful thinking based on where Juno is now. But remember, Exelixis wasn't always the Exelixis we know today.

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Keith Speights owns shares of Celgene. The Motley Fool owns shares of and recommends Celgene and Exelixis. The Motley Fool recommends Juno Therapeutics. The Motley Fool has a disclosure policy.