Juno Therapeutics Inc (NASDAQ:JUNO) reported financial results and business highlights for the fourth quarter and year ended December 31, 2016.
“2016 was a year of progress and learning for Juno and the cancer immunotherapy field. We continue to experience encouraging signs of clinical benefit in our trial addressing NHL, but we also recognize the unfortunate and unexpected toxicity we saw in our trial addressing ALL with JCAR015. We have decided not to move forward with the ROCKET trial or JCAR015 at this time, even though it generated important learnings for us and the immunotherapy field. We remain committed to developing better treatments for patients battling ALL and believe an approach using our defined cell technology is the best platform to pursue. We intend to begin a trial with a defined cell product candidate in adult ALL next year. We look forward to sharing detailed data supporting our learnings from the ROCKET trial at an upcoming scientific conference,” said Hans Bishop, Juno’s President and Chief Executive Officer. “Looking forward into 2017, we continue to be optimistic about the progress we are making with JCAR017 and our pipeline more broadly. We expect 2017 will be a data-rich year of key insights, based on up to 20 ongoing trials by year end, and we plan to present data from these trials as appropriate throughout the year.”
2016 and Recent Corporate Highlights
- CD19 Portfolio – Meaningful developments with Juno’s CD19-directed portfolio across B cell malignancies including relapsed / refractory (r/r) non-Hodgkin lymphoma (NHL), r/r chronic lymphocytic leukemia (CLL), and r/r acute lymphoblastic leukemia (ALL):
- NHL – Investigators presented interim results at the American Society of Hematology meeting in December 2016 (ASH 2016) from the Phase I TRANSCEND study in patients with r/r diffuse large B cell lymphoma (DLBCL), follicular lymphoma grade 3B, and mantle cell lymphoma (MCL) who were treated with fludarabine/cyclophosphamide (flu/cy) lymphodepletion and JCAR017. Topline results as of a data cutoff date of November 23, 2016 included a 12/20 (60%) complete response rate in patients with r/r DLBCL (N=19) and follicular lymphoma grade 3B (N=1) treated with a single dose of JCAR017 at dose level 1 (5×107 cells). No severe cytokine release syndrome (sCRS) was observed; grade 3-4 neurotoxicity was observed in 3/22 (14%) patients, and of those evaluable for reversibility (N=2), all resolved. In addition, the side effect profile of JCAR017 plus its cell persistence suggest the potential for combination therapy. The Phase I TRANSCEND trial continues, enrolling more patients at dose levels 1 and 2. Juno intends to initiate a pivotal trial in the U.S. in patients with r/r DLBCL in 2017.
- The Phase Ib combination trial of JCAR014 and MedImmune’s investigational programmed death ligand 1 (PD-L1) immune checkpoint inhibitor, durvalumab, in patients with r/r NHL has begun. The investigational new drug application (IND) has cleared for, and Juno plans to enroll patients in 2017 in, a Phase I trial in certain adult B cell malignancies, including r/r NHL, for a CD19 product candidate that incorporates a fully human binding domain. Juno also expects to begin a Phase I trial in r/r B cell malignancies for its CD19/4-1BB ligand armored CAR in 2017.
- CLL – Investigators presented interim results at ASH 2016 from a Phase I/II study of heavily pre-treated patients with CLL who failed treatment with ibrutinib, a standard-of-care treatment for high-risk and elderly individuals with CLL. Fifteen of 17 (88%) efficacy-evaluable patients who had bone marrow disease at the start of the trial and treated with flu/cy at the two lowest doses of JCAR014 had a complete marrow response by flow cytometry as of the data cutoff date of December 4, 2016. Fourteen of the complete bone marrow response patients had a response assessment by IgH deep sequencing, a more sensitive measure than flow cytometry, with 7/14 (50%) having no detectable disease. As of the data cutoff date, all seven of these patients were alive and progression free with follow-up ranging from 2 to 24 months. Two of 24 (8%) patients developed grade 3-5 sCRS and 6/24 (25%) patients developed grade 3-5 neurotoxicity. There was one treatment-related mortality (4%) in the CLL portion of the trial in a patient who received flu/cy lymphodepletion, with both grade 5 sCRS and cerebral edema. Plans to study JCAR014 in combination with ibrutinib in CLL are underway, with a cohort expected to begin enrollment in early 2017. Juno is planning to file an IND in 2017 in support of a potential Juno-sponsored Phase I/II trial with JCAR017 in CLL.
- ALL – Juno experienced a setback in 2016 to its adult r/r ALL development plans when a greater than expected incidence of severe neurotoxicity was observed, along with five deaths from cerebral edema, in patients treated in the Phase II trial with JCAR015 in adult patients with r/r ALL, referred to as the ROCKET trial. The Phase II trial was placed on clinical hold by the FDA briefly in July 2016. In November 2016, the trial was again placed on hold and has remained on hold while Juno conducted an investigation into the toxicity. Through the investigation Juno identified multiple factors that may have contributed to this increased risk, including patient specific factors, the conditioning chemotherapy patients received, and factors related to the product. Although Juno believes there are protocol modifications and process improvements that could enable Juno to proceed with JCAR015 in clinical testing in adult r/r ALL, Juno would first need to establish preliminary safety and dose in a Phase I trial. As a result of the timing delay that would entail and Juno’s belief that it has other product candidates in its pipeline that are likely to provide improved efficacy and tolerability, Juno, in collaboration with partner Celgene, has made a strategic decision to cease development of JCAR015 at this time and to redirect associated resources to the development of a defined cell product candidate in the adult r/r ALL setting.
- As for pediatric ALL, investigators presented results at ASH 2016 from the Phase I portion of the Phase I/II Pediatric Leukemia Adoptive Therapy-02 (PLAT-02) study with JCAR017 in 43 evaluable children and young adults with r/r CD19-positive ALL. The presentation updated data previously presented at ASCO in June 2016: 40/43 (93%) patients experienced a minimal residual disease (MRD)-negative complete remission (CR) as measured by flow cytometry as of the data cutoff date of July 19, 2016. In patients who received preconditioning with flu/cy lymphodepletion, 14/14 (100%) patients achieved a MRD-negative CR. The estimated 12-month event-free survival across all patients in the trial was 50.8% (95%CI 36.9, 69.9) and overall survival (OS) was 69.5% (95%CI 55.8, 86.5). Grade 3-4 neurotoxicity and sCRS were each observed in 10/43 (23%) patients.
- Across our CD19 portfolio, the most common severe treatment-related side effects are sCRS and severe neurotoxicity, including several cases of fatal cerebral edema. Other treatment emergent adverse events observed in at least 25% of patients across our CD19 product candidates include cytopenias, febrile neutropenia, electrolyte abnormalities, hypotension, infections, pyrexia, fatigue, and hyperglycemia. All of Juno’s product candidates are investigational and their safety and efficacy have not been established.
- Pipeline Portfolio – Juno continues to conduct clinical trials beyond the CD19 target:
- JCAR018 – This CD22-directed, fully-human CAR T cell product candidate has the potential to treat or prevent CD19-negative relapses. Investigators from the National Cancer Institute (NCI) presented early data from the trial at ASH 2016, with 7/8 (88%) of r/r ALL patients achieving a MRD-negative CR at dose level 2 (1×106 cells/kg) as measured by flow cytometry, as of a data cutoff date of October 4, 2016. Three of 7 (43%) patients who achieved an MRD-negative CR at dose level 2 were in ongoing remission ranging from 3 to 12 months. This trial continues to enroll patients. Combining a CD19-directed therapy and a CD22-directed therapy may increase the selection pressure on the cancer and significantly reduce the overall risk of relapse, particularly in patients with ALL. Juno is currently investigating pre-clinical constructs to better understand the optimal way to target these two targets in the same product.
- JTCR016 – This WT-1-directed, T cell receptor (TCR) cell product candidate is currently being studied in acute myeloid leukemia (AML), refractory mesothelioma, and non-small cell lung cancer. In the first three solid organ tumor patients treated as of the data cutoff date of April 1, 2016, all with mesothelioma, preliminary data presented at the American Association for Cancer Research Annual Meeting 2016 showed one patient with an ongoing partial response to the WT-1 TCR and one with stable disease. The clinical activity appeared to correlate with the pharmacokinetics of the engineered T cells, as the patient with the partial response had the best T cell expansion and persistence. JTCR016 was generally well-tolerated in these three refractory mesothelioma patients, with no evidence of sCRS or severe neurotoxicity.
- Announced breakthrough therapy designation and access to the Priority Medicines (PRIME) scheme for investigational drug JCAR017. JCAR017 received breakthrough therapy designation from the FDA for the treatment of patients with r/r aggressive large B-cell NHL, including DLBCL, not otherwise specified (de novo or transformed from indolent lymphoma), primary mediastinal B-cell lymphoma (PMBCL) or Grade 3B follicular lymphoma. In addition, the European Medicines Agency (EMA) Committee for Medicinal Products for Human Use (CHMP) and Committee for Advanced Therapies (CAT) have granted JCAR017 access to the PRIME scheme for r/r DLBCL.
- Began manufacturing multiple product candidates at the Juno manufacturing plant in Bothell, WA in 2016.
- Juno continues trials for solid tumor product candidates against five different targets – JCAR024 (ROR-1-directed CAR T), JCAR020 (MUC-16-directed armored CAR T engineered to secrete IL-12), JCAR023 (L1-CAM-directed CAR T), JTCR016 (WT-1- directed TCR) and a Lewis Y-directed CAR.
- Continued collaboration with Celgene to leverage T cell therapeutic strategies with an initial focus on CAR T and TCR therapies. In April 2016, Celgene exercised its option to develop and commercialize CAR product candidates from Juno’s CD19 program outside of North America and China. Celgene paid Juno an option exercise fee of $50.0 million and the companies now generally share worldwide research and development expenses for CAR product candidates in the CD19 program. Celgene has commercial rights outside of North America and China and will pay Juno a royalty at a percentage in the mid-teens on any future net sales in Celgene’s territories of CAR therapeutic products developed through the CD19 program. Juno retains commercialization rights in North America and China.
In March 2016, Celgene exercised its annual right to purchase additional shares of the Company’s common stock to “top-up” its ownership interest in the Company. Celgene purchased 1,137,593 shares at a price of $41.32 per share, for an aggregate cash purchase price of $47.0 million.
- Completed two acquisitions, which substantially increased Juno’s capabilities, including:
- AbVitro, a leading next-generation single cell sequencing platform company that has augmented Juno’s capabilities to create best-in-class engineered T cells against a broad array of cancer targets, including significantly improving the speed of generating TCR binders, while also enabling comprehensive profiling of functional immune repertoires with cancer tissues. Juno and Celgene have agreed in principle to enter an agreement to license Celgene a subset of the acquired technology and grant Celgene options to certain related potential product rights emanating from the acquired technology.
- RedoxTherapies, a privately held company with an exclusive license to vipadenant, a small molecule adenosine A2a receptor antagonist that has the potential to disrupt important immunosuppressive pathways in the tumor microenvironment in certain cancers. Juno intends to explore this molecule in combination with its engineered T cell platform and may over time explore it in other areas as well. The upfront consideration for the RedoxTherapies acquisition was $10.0 million in cash. The seller is also eligible to receive payments upon the achievement of clinical, regulatory, and commercial milestones.
- Completed licensing transactions to expand Juno’s research and development capabilities, including:
- Memorial Sloan Kettering Cancer Center (MSK) and Eureka Therapeutics, Inc. for innovative, fully-human binding domains targeting B cell maturation antigen (BCMA), along with antibodies against two additional undisclosed multiple myeloma targets to be used for the potential development and commercialization of CAR T cell therapies for patients with multiple myeloma. MSK and Eureka Therapeutics received an undisclosed upfront payment and are eligible to receive additional payments upon the achievement of undisclosed clinical, regulatory, and commercial milestones, and royalties on net sales. Juno has begun a Phase I trial with a BCMA-directed CAR product candidate at MSK in patients with multiple myeloma.
- Defeated an attempt to invalidate a patent exclusively licensed by Juno and sued Kite Pharma, Inc., regarding a CAR T technology that can be used, for example, for the treatment of B cell malignancies. In August 2015, Kite filed a petition with the U.S. Patent & Trademark Office (USPTO) for inter partes review in an attempt to invalidate U.S. Patent No. 7,446,190 by challenging all of its claims. Following proceedings, the USPTO Patent Trial and Appeal Board issued a final written decision upholding all the claims of this patent. Kite is appealing this decision to the U.S. Court of Appeals for the Federal Circuit. Juno exclusively licenses the ’190 patent, titled “Nucleic Acids Encoding Chimeric T Cell Receptors,” from Sloan Kettering Institute for Cancer Research, an affiliate of MSK. The patent covers, among other things, a construct for a CD19-targeted CAR T cell treatment that employs a certain CD28 costimulatory domain. In addition, Juno is suing Kite, seeking a declaratory judgment that Kite’s lead product candidate, KTE-C19, will infringe the patent when commercially produced.
- Formed JW Therapeutics (Shanghai) Co., Ltd., a new company in China along with WuXi AppTec, with a mission to develop novel cell-based immunotherapies for patients with hematologic and solid organ cancers in China. The new company will leverage Juno’s world-class CAR and TCR technologies and WuXi AppTec’s research and development and manufacturing platform and local expertise.
- Announced the opening of a new, best-in-class clinical trials unit dedicated to immuno-oncology, in collaboration with the University of Washington, the Seattle Cancer Care Alliance, and the Fred Hutchinson Cancer Research Center (FHCRC). The clinical trials unit has been established to accelerate the clinical care of patients and the generation of translational medicine insights with cutting-edge immuno-oncology therapeutic candidates.
- Hired key talent, including the appointment of Corsee Sanders as Executive Vice President and Head of Development Operations.
Fourth Quarter and 2016 Financial Results
- Cash Position: Cash, cash equivalents, and marketable securities as of December 31, 2016 were $922.3 million compared to $1.22 billion as of December 31, 2015.
- Cash Burn: Cash burn in 2016, excluding cash inflows and outflows from business development activities, was $232.2 million, consistent with guidance of $220.0 million to $250.0 million. Included in cash burn in 2016 was $56.2 million for property and equipment, of which $18.2 million was for the purchase of Juno’s manufacturing facility. Excluding cash inflows and outflows from business development activities, cash burn in 2015 was $147.8 million including $28.2 million for the build out of Juno’s manufacturing facility and general lab equipment. The cash burn increase of $84.4 million was primarily driven by cash outflows in connection with the overall growth of the business including clinical, manufacturing, and research, costs to build out Juno’s headquarters facility, and purchases of manufacturing equipment. These increases were offset by $19.4 million received from Celgene for reimbursement of costs incurred by Juno in connection with the CD19 program.
Cash burn in the fourth quarter of 2016, excluding cash inflows and outflows from business development activities, was $106.6 million including $38.4 million for the purchase of property and equipment, of which $18.2 million was for the purchase of Juno’s manufacturing facility. Cash burn in the fourth quarter of 2015 was $51.4 million, including $4.8 million for capital expenditures. The cash burn increase of $55.2 millionwas primarily due to cash outflows in connection with the overall growth of the business, including clinical, manufacturing, and research costs, the purchase of Juno’s manufacturing facility, build out of its new headquarters facility, and purchase of manufacturing equipment. These increases were offset by $10.2 million received from Celgene for reimbursement of costs incurred by Juno in connection with the CD19 program.
- Revenue: Revenue for the three and twelve months ended December 31, 2016 was $21.2 million and $79.4 million, respectively, compared to $4.2 million and $18.2 million for the three and twelve months ended December 31, 2015, respectively. The increases of $17.0 million and $61.2 million in the three and twelve months ended December 31, 2016, respectively, were due primarily to revenue recognized in connection with the Celgene collaboration and CD19 opt-in.
- R&D Expenses: Research and development expenses for the three and twelve months ended December 31, 2016, inclusive of non-cash expenses and computed in accordance with GAAP, were $57.4 million and$264.3 million, respectively, compared to $75.6 million and $205.2 million for the same periods in 2015. The increase for the twelve months ended December 31, 2016 was primarily due to increased costs to execute Juno’s clinical development strategy, manufacture its product candidates, expand its overall research and development capabilities, milestones achieved in 2016, and an increase in stock-based compensation expense. These increases were offset by lower costs to acquire technology and gains recorded in connection with the change in value of the success payment and contingent consideration liabilities. The decrease for the three months ended December 31, 2016 was primarily due to gains recorded in connection with the change in value of the success payment and contingent consideration liabilities, partially offset by increased costs to execute Juno’s clinical development strategy, manufacture its product candidates, expand its overall research and development capabilities, and an increase in stock-based compensation expense. For the three and twelve months ended December 31, 2016, Juno recorded gains of $11.7 million and $32.5 million, respectively, related to Juno’s success payment liability, compared to expenses of $34.3 million and $51.6 million for the three and twelve months ended December 31, 2015.
- Non-GAAP R&D Expenses: Non-GAAP research and development expenses for the three and twelve months ended December 31, 2016 were $73.1 million and $287.6 million, respectively, compared to $41.1 million and $116.5 million for the same periods in 2015. Non-GAAP research and development expenses for the three and twelve months ended December 31, 2016 include $8.6 million and $34.5 million of stock-based compensation expense, respectively, compared to $3.6 million and $10.9 million for the same periods in 2015. Non-GAAP research and development expenses in 2016 exclude the following:
- A gain of $11.7 million and $32.5 million for the three and twelve months ended December 31, 2016, respectively, associated with the change in the estimated fair value and elapsed service period for Juno’s potential success payment liabilities to FHCRC and MSK.
- Non-cash stock-based compensation expense of $0.6 million and $3.9 million for the three and twelve months ended December 31, 2016, respectively, related to a 2013 restricted stock award to a co-founding director that became a consultant upon his departure from Juno’s board of directors in 2014.
- A gain of $4.5 million and $9.7 million for the three and twelve months ended December 31, 2016, respectively, associated with the change in the estimated fair value of the contingent consideration liabilities recorded in connection with the Stage and X-Body acquisitions.
- Upfront payments related to technology licensing and the RedoxTherapies acquisition of $15.0 millionfor the twelve months ended December 31, 2016.
- Non-GAAP research and development expenses in 2015 exclude the following:
- An expense of $34.3 million and $51.6 million for the three and twelve months ended December 31, 2015, respectively, associated with the change in estimated fair value and elapsed accrual period for Juno’s potential success payment liabilities to FHCRC and MSK.
- Non-cash stock-based compensation expense of $1.4 million and $6.2 million for the three and twelve months ended December 31, 2015, respectively, related to a 2013 restricted stock award to a co-founding director that became a consultant upon his departure from Juno’s board of directors in 2014.
- A gain of $1.1 million for the fourth quarter of 2015 in the estimated fair value of the contingent consideration recorded in connection with the Stage and X-Body acquisitions.
- Upfront payments related to license agreements of $30.8 million for the twelve months ended December 31, 2015 associated with the Editas and Fate Therapeutics collaborations.
- G&A Expenses: General and administrative expenses on a GAAP basis for the three and twelve months ended December 31, 2016 were $19.5 million and $70.7 million, respectively, compared to $16.0 million and $57.2 million for the same periods in 2015. The increase of $3.5 million in the fourth quarter of 2016 compared to the same period in 2015 was due to an increase in consulting costs related to commercial readiness and legal costs, offset by decreased costs incurred to support business development activities. The increase of $13.5 million in 2016 compared to 2015 was primarily due to increased personnel costs, including stock-based compensation, and increased consulting costs related to commercial readiness, offset by decreased costs incurred to support business development activities.
General and administrative expenses include $5.2 million and $21.0 million of non-cash stock-based compensation expense for the three and twelve months ended December 31, 2016, respectively, compared to $5.4 million and $14.9 million for the same periods in 2015.
- GAAP Net Loss: Net loss for the three and twelve months ended December 31, 2016 was $52.8 million, or $0.51 per share, and $245.6 million, or $2.42 per share, respectively, compared to $85.2 million, or $0.89 per share and $239.4 million, or $2.72 per share for the same periods in 2015.
- Non-GAAP Net Loss: Non-GAAP net loss, which incorporates the non-GAAP R&D expense, for the three and twelve months ended December 31, 2016 was $68.5 million, or $0.65 per share, and $268.9 million, or $2.65 per share, respectively, compared to $50.7 million, or $0.53 per share, and $150.7 million, or $1.72 per share, respectively, for the same periods in 2015.
A reconciliation of GAAP net loss to non-GAAP net loss is presented below under “Non-GAAP Financial Measures.”
2017 Financial Guidance
Juno expects 2017 cash burn, excluding cash inflows or outflows from upfront payments related to business development activities, of between $270 million and $300 million.
- Operating burn estimated to be between $245 million and $275 million.
- Capital expenditures estimated to be between $22 million and $27 million, the majority of which are related to one-time infrastructure build-outs.
Shares of Juno Therapeutics are down nearly 3% to $24.50 in after-hours trading Wednesday. JUNO has a 1-year high of $49.72 and a 1-year low of $17.52. The stock’s 50-day moving average is $21.21 and its 200-day moving average is $25.08.
On the ratings front, JUNO has been the subject of a number of recent research reports. In a report issued on February 22, Wells Fargo analyst Jim Birchenough initiated coverage on the stock with a Buy rating. On February 1, Wedbush’s David Nierengarten initiated coverage with a Hold rating on the stock with a price target of $24.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Jim Birchenough and David Nierengarten have a yearly average return of 27.4% and 31% respectively. Birchenough has a success rate of 53% and is ranked #79 out of 4503 analysts, while Nierengarten has a success rate of 53% as well and is ranked #74.
Sentiment on the street is mostly neutral on JUNO stock. Out of 7 analysts who cover the stock, 4 suggest a Hold rating and 3 recommend to Buy the stock. The 12-month average price target assigned to the stock is $32.50, which implies an upside of 31% from current levels.
Juno Therapeutics, Inc. operates as a biopharmaceutical company, which focuses on re-engaging the body’s immune system to revolutionize the treatment of cancer. It platforms include chimeric antigen receptors and T-cell receptors. The chimeric antigen receptors technology directs T-cells to recognize cancer cells based on expression of specific cell surface proteins. The T-cell receptors technology provides the T-cells with a specific T-cell receptor that recognizes protein fragments derived from either intracellular or extracellular proteins.