Why Juno Therapeutics Stock Is Soaring Today

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What happened

Shares of Juno Therapeutics (NASDAQ: JUNO), a clinical-stage adoptive cell therapy company, rose by 55.4% in premarket trading Wednesday. Driving the monstrous surge was the news that its development partner, Celgene Corp. (NASDAQ: CELG), is reportedly preparing a buyout offer.

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While Celgene's shares were down by 1.8% before the opening bell on the back of the buyout rumor, it's having a positive impact on the stock prices of other adoptive cell therapy companies. Shares of Bellicum Pharmaceuticals (NASDAQ: BLCM), bluebird bio (NASDAQ: BLUE), and Cellectis S.A. (NASDAQ: CLLS) were all up by more than 7% in premarket trading on light volume.

So what

Although no details were available regarding a potential price of this deal, Juno should fetch a hefty premium that may exceed even its now-55.4%-higher value. Gilead Sciences (NASDAQ: GILD), after all, paid nearly $12 billion to acquire Kite Pharma only a few months ago. Juno's market cap prior to this rumor stood at only $5.5 billion.

Now, it's true that when Gilead bought it, Kite was closer to the commercial stage of its life cycle than Juno presently stands. But with its lead product candidate, JCAR017, Juno does have a realistic shot at becoming only the third company to bring a chimeric antigen receptor T cell (CAR-T) therapy to market. Moreover, JCAR017 could also turn out to be a best-in-class product, based on its promising safety profile. So there's no compelling reason to think that Juno's management would be willing to accept a low-ball offer from Celgene.

Now what

If Celgene is able to bring Juno into the fold, the next logical step might be to purchase its other adoptive cell therapy partner, Bluebird. An acquisition of Bluebird would give it full control over the promising multiple myeloma CAR-T therapy bb2121, and would bring all of its CAR-T assets under one roof. In this way, Celgene might be able to leap ahead of Gilead in this rapidly evolving market.

Another interesting implication of this apparent plan to buy Juno is that an arms race may be brewing within the CAR-T space at large. Celgene, after all, doesn't really need to buy Juno; it has a rock solid development deal with the biotech already in place. Put simply, there may be another company -- perhaps Gilead -- lurking in the shadows that's driving this bid.

If that turns out to be the case, the slew of CAR-T companies that have popped up over the past few years may become hot M&A targets in 2018. And that scenario would bode well for companies like Bellicum and Cellectis, which haven't really participated in the early valuation boom across this sub-sector.

Bottom line: If Juno does become the next CAR-T acquisition, it could very well spark an M&A extravaganza as top drugmakers attempt to gain footholds in this novel anti-cancer market.

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George Budwell owns shares of Bellicum Pharmaceuticals. The Motley Fool owns shares of and recommends Bluebird Bio, Celgene, and Gilead Sciences. The Motley Fool recommends Juno Therapeutics. The Motley Fool has a disclosure policy.

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