Juno Just Raised A Ton of Cash. Here Comes the Spending Part.
The IPO is just another round of financing. Forgive the biotech cliché, but with Juno Therapeutics, it’s never been more evident.
Seattle-based Juno (NASDAQ: JUNO) ended its first day of trading Friday, and both investors and company should be happy. The stock price rose nearly 50 percent, from $24 at the opening bell to $35 when the Nasdaq closed. And that $24-a-share opening price, which brought $265 million more into the company’s coffers, was well above the early price target that Juno declared a couple weeks ago.
It all means that Juno has a huge war chest, with more than $300 million raised privately, plus the $265 million from the IPO. But it also plans to spend a lot of money, too. How much, it’s not saying. Chief financial officer Steve Harr said the company has not given 2015 guidance.
But don’t be surprised if a buoyant stock price prompts Juno to return to the markets soon to sell more shares. It could return to its current investors, too.
“The investors are some of the most long-term-oriented in the business,” says Bob Nelsen (pictured), the venture capitalist at ARCH Venture Partners in Seattle who was instrumental in putting Juno together and building its early investor base. ARCH owned 15 percent of Juno before the IPO. “They’re investing because this is a long game, and we’re in the top of the first inning.”
Among major investors, ARCH was the only traditional venture group. Another 34 percent of the company, pre-IPO, was owned by funds under the management of Crestline Investors, a Fort Worth, TX financial firm (including the State of Alaska’s oil-revenue fund).
Nelsen and Harr declined to discuss plans for a follow-on offering or Juno’s near-future cash needs.
Whereas most young biotechs move, at best, a few drug programs through clinical trials, one-year-old Juno looks more like a pharma company, albeit one taking a chance on new medical technology. The cell-based cancer immunotherapy programs under Juno’s roof are “autologous,” which means they remove a sick patient’s own T cells, engineer them to turn them into better cancer killers, and infuse them back into the patient.
Juno has exclusive rights to four programs now in Phase 1 trials, all for hematologic cancers. It could have more than ten trials ongoing by the end of 2015, with an eye on at least one product approved by 2017 for patients with acute lymphoblastic leukemia who haven’t been helped by other treatments. That’s a very fast track.
To date, Juno’s institutional partners—the Fred Hutchinson Cancer Research Center of Seattle, the Seattle Children’s Research Institute, and Memorial Sloan-Kettering Cancer Center in New York—have sponsored the early clinical trials, but that will change and the costs will climb as Juno shoulders more burden and moves the products into larger Phase 2 trials. (Even in this early phase, Juno has spent more than $90 million on operations.)
Another source of near-term cash for Juno could be pharma partners willing to pay cash up front for a share of costs and potential profits. But to date the firm has not outlicensed any programs, and it doesn’t seem eager to do so within the U.S. “We believe we are building all of the capabilities needed to successfully develop and commercialize our CD19 platform in the U.S.,” Harr said Friday, with CD19 referring to one kind of T-cell therapy the company is developing.
Meanwhile, it won’t just be clinical trial costs accruing in the next year or two.
There’s more basic science: The firm is working on its own immunotherapy technology, including T-cells with on/off switches and that secrete proteins to help stimulate the immune system. (Others are working on such improvements, too; Houston-based Bellicum Therapeutics (NASDAQ: BLCM), for example, which went public 24 hours before Juno, is also developing cells with an on/off switch.)
There’s the need to build a commercial structure: If and when products get to market, Juno will also sell them. It is aiming to be what was once the grand dream of any biotech: a FIPCO. (That’s “fully integrated pharmaceutical company,” for you youngsters out there.)
Sales and marketing will also cost money, although in its S-1, Juno says it will start modestly, “promoting”—that is, sending sales teams—to the 41 hospitals and clinics that the National Cancer Institute has designated as “comprehensive cancer centers.”
(Juno CEO Hans Bishop had an up-close view of a cutting-edge commercial cell therapy organization gone awry. He was chief operating officer for Dendreon (NASDAQ: DNDN), which built a commercial and manufacturing organization for its approved prostate cancer immunotherapy, Provenge, but collapsed into bankruptcy last month because of weak sales and huge debts.)
If Juno’s immunotherapy programs gain traction against the thornier problem of treating solid tumors (lung, breast, pancreatic, and stomach cancer are all examples, and they make up the vast majority of cancer cases), Juno says it will expand the size of its commercial organization. In 2015, the firm should also provide details of its European expansion.
And there are payments to others: With the heady stock debut, Juno is already on the clock to make what it calls “success payments.”
They’re a very unusual mechanism. As the stock price increases from $20 to $160 a share, the payments to Fred Hutch, will increase, up to a total of $375 million. For MSK, payments start when the stock price hits $40 and goes to $120, and top out at $150 million. The payments can be made with equity instead of cash. (In addition, Fred Hutch owns 13 million Juno shares, and MSK owns 2 million.)
The third academic partner of Juno is Seattle’s Children’s Research Institute; it has a more standard licensing agreement with Juno based on product milestones and royalties, but there is no mention of stock-based “success payments.”
When asked earlier this month about Seattle Children’s, Bishop said, “Some institutions don’t want stock, but for the ones who did, it’s a fair way of aligning their participation with some of our stock success.”
When asked if Seattle Children’s didn’t want stock, Bishop would only say, “Some institutions did, and some didn’t.”
A Seattle Children’s spokeswoman deferred all questions back to Juno.
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