J.P. Morgan Weighs in on Juno Therapeutics Inc and Celgene Corporation Following Partnership Announcement

On June 29, Juno Therapeutics Inc (NASDAQ:JUNO) and Celgene Corporation (NASDAQ:CELG) announced a ten-year collaboration to develop new therapies for cancer and auto-immune diseases, specifically T cell therapies. Celgene will have the option to commercialize Juno’s programs outside North America, while Juno will be have the ability to co-develop and co-promote certain Celgene therapies.

CAR T-cell therapy, or chimeric antigen receptors, is a method of treating cancer that harnesses the patient’s own immune system. A patient’s T cells are multiplied and then infused back into the patient in an attempt to fight back against the cancer. Juno currently has several CAR therapies in its pipeline aimed at different forms of leukemia and lymphoma.

According to the agreement, Celgene will make an initial investment of $1 billion in Juno. This includes buying more than nine million shares of Juno for $93 per share. At the time of the announcement, shares of Juno were trading at $46; nearly half that amount. This signal of confidence caused shares of JUNO to soar over 40% in pre-market trading following the announcement, though the price stabilized during the day and closed at $46.30.

The partnership will be mutually beneficial, as described by executives of both companies. Celgene CEO Bob Hugin pointed out Juno’s “impressive capabilities and technologies in the areas of T cell biology and cellular therapy.” On the other hand, Juno’s CEO Hans Bishop is looking forward to integrating Celgene’s “leading small molecule and protein capabilities that complement Juno’s advanced engineered T cell capabilities.”

Although the partnership seems to be a win for both biotechnology companies, Cory Kasimov of J.P. Morgan was more bullish on Juno than Celgene. The analyst reiterated an Overweight rating on Juno and raised his price target from $66 to $83. Kasimov explains, “From JUNO’s perspective, this is clearly a big win; the deal provides a huge infusion of cash as well as validation for the company’s diversified approach within CAR-T, not to mention the overall potential of this nascent field.” Overall, the analyst believes the partnership will make Juno a more competitive player in the biotechnology field thanks to its new advanced capabilities.

Despite his bullishness on Juno, Kasimov reiterated a Neutral rating on Celgene with an unchanged price target of $126. The analyst views the deal with high levels of both risk and reward for Celgene, but adds that this move did not come as a surprise for Celgene.

Kasimov expects the deal to close in the third quarter. He added, “JUNO noted it plans to accelerate all the investments it is making, first and foremost in the people it hires, in addition to moving a bit faster across the pipeline and in manufacturing.”

Cory Kasimov has a 61% overall success rate recommending stocks with a +14% average return per rating.


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