The Duo of Reasons Behind Kite Pharma Inc.'s 26% Move Higher

By Sean

What happened

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Shares of Kite Pharma (NASDAQ: KITE), a clinical-stage biotechnology company focused on developing therapies based on chimeric antigen receptors (CARs) for the treatment of solid and blood cancers, surged as much as 26% during Tuesday's trading session after the company announced fourth-quarter earnings results and released top-line clinical data for its lead drug, axicabtagene ciloleucel (previously known as KTE-C19).

So what

Without question, the biggest catalyst today for Kite Pharma is the release of ZUMA-1 top-line trial data on axicabtagene ciloleucel as a treatment for patients with chemorefractory aggressive B-cell non-Hodgkin lymphoma.

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Of the 101 patients enrolled in ZUMA-1, 82% of those with diffuse larger B-cell lymphoma (77 patients) exhibited an objective response, with 49% demonstrating a complete response. The experimental treatment also proved durable, with 36% of patients still demonstrating an objective response after six months, including 31% with a complete response. The smaller cohort, consisting of the other 24 patients with primary mediastinal B-cell lymphoma and transformed follicular lymphoma, had an overall response rate of 83%, with 54% maintaining that response through month six. With Kite's experimental drug exhibiting a durable response, it's now up to a competing drug (JCAR017) from Juno Therapeutics (NASDAQ: JUNO) to do the same in a diffuse large B-cell lymphoma (DLBCL) trial later this year.

Beyond the clinical data, the lesser catalyst comes from Kite's fourth-quarter earnings report. The company wound up announcing a loss of $1.31 per share in the fourth quarter, which was $0.01 narrower than Wall Street was expecting, on revenue of $4.9 million. The company also issued revenue guidance of $40 million to $50 million in 2017, although it has no products approved by the U.S. Food and Drug Administration. Kite anticipates having enough cash to fund its operations through the first half of 2018.

Now what

Earnings report aside (because earnings reports are usually non-events for clinical-stage biotech companies, so long as they maintain sufficient funding to continue their research), the real star here is axicabtagene ciloleucel.

The big question with Kite's CAR-T drug was whether it would have a durable response beyond just the initial strong readings seen in previous data releases; the ZUMA-1 study has demonstrated that is indeed the case. It's lifted the bar pretty high for Juno's lead drug, and the path Kite is on now could put its CAR-T drug on the market ahead of Juno's by at least a few months. That first-in-class advantage could be huge in developing rapport with physicians and gobbling up DLBCL market share.

It's tough to get too excited until we see what Kite's biggest competitor can deliver, but based on today's data release, the nearly $2 billion in peak annual sales predicted by some Wall Street analysts seems quite achievable for axicabtagene ciloleucel.

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Sean Williams has no position in any stocks mentioned. The Motley Fool recommends Juno Therapeutics. The Motley Fool has a disclosure policy.