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With $310M And Public Investors Aboard, Could a Juno IPO Come Next?

Xconomy Seattle — 

We won’t know for some time whether the cancer immunotherapies under development at high-powered Seattle startup Juno Therapeutics are the real deal. But there are plenty of investors willing to bet on them.

Juno announced today that it has raised a $134 million Series B round from all of its “major” prior investors—the company didn’t specify, but ARCH Venture Partners and the state of Alaska’s oil revenue fund are among its previous backers—and ten “public mutual funds and healthcare-focused funds” that it declined to name.

Unlike most biotech venture financings, the cash is all up front, says Juno CEO Hans Bishop, which means Juno has now raised $310 million in less than a year.

With investors now on board that are best known for backing public companies, it would be a surprise if Juno did not attempt to go public this year or in 2015.

Hans Bishop, CEO of Juno Therapeutics

Hans Bishop, CEO of Juno Therapeutics

“We’ll talk about that when the time comes,” Bishop says, when asked if Juno is considering an IPO. “The [funds] coming into this round are really some of the deepest pools of capital in the country, and it’s long-term capital that has an outstanding track record of company-building. The benefit of these types of investors…is, it gives us optionality. If the right thing to do later is to IPO, they’ll be supportive of that. If the right thing is to stay private, they’ll be supportive of that.”

In the current long window for biotech IPOs, open since the start of 2013, many firms have used a “crossover” financing strategy, bringing public funds into a final private round, a signal that an IPO is in the company’s sights. Some recent examples: Sage Therapeutics (NASDAQ: SAGE), Zafgen (NASDAQ: ZFGN), and Dicerna Pharmaceuticals (NASDAQ: DRNA).

What makes Juno so sure that these investors will in fact stick around rather than sell Juno’s stock soon after a successful IPO? Bishop says, without naming names, that they’re known for “picking carefully and then sticking with their companies and supporting their build-out.”

ARCH managing director and Juno co-founder Bob Nelsen adds that the average holding time for the investors Juno has brought in is about 11 years, and says that Juno could’ve raised much more cash if that had been its goal.

“This was purely a relationship round,” Nelsen says, while declining to comment about a potential IPO. “This is about figuring out who the best long-term shareholder base is. We really [now] have the shareholder base of a commercial operating company that has a $50 billion market cap.”

Juno is nowhere near actually building that value. For that, like any other biotech, Juno will need to amass more data. Juno splashed onto the scene in December, formed around technologies at three research institutions: the Fred Hutchinson Cancer Research Center and Seattle Children’s Research Institute in Washington, and the Memorial Sloan-Kettering Cancer Center in New York.

It was started up by Arch and the Alaska Permanent Fund, raised a mammoth $176 million Series A, assembled a big-name advisory board with the likes of Rockefeller University president (and former Genentech chief scientific officer) Marc Tessier-Lavigne and others, and has lured former Morgan Stanley biotech investment banking head Steve Harr to become its CFO.

The big bet—one of the biggest in the history of biotech, seeing how much cash has been raised in such a short time—is that Juno can become a major developer in the new wave of cell-based cancer immunotherapies.

The 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.

One of the programs, known as chimeric antigen receptor T-cell therapy, or “CAR-T” therapy for short, has stirred excitement across the scientific community because of its potential not to just treat a broad range of cancers, but reduce them to undetectable levels. With a treatment licensed exclusively to Juno, Sloan-Kettering, for instance, reported some impressive results from a small trial earlier this year: of 16 acute lymphoblastic leukemia (ALL) patients treated with a CAR-T therapy, 88 percent of them were effectively cured.

It’ll be a long time, of course, before oncologists and patients know whether the procedures prove safe and effective. Sloan-Kettering, for instance, had to suspend some CAR-T clinical trials for a short time because two patients died during treatment. Though the trials have been restarted, the incidence of cytokine release syndrome—a toxic immune response that can occur when a cancer treatment acts rapidly on its target—will be closely watched.

“We’re working on a number of approaches that we think have the potential to ameliorate it, or maybe even eliminate it,” Bishop says, though he declined to be more specific.

The temporary trial stoppage highlighted just how new the field is, and how much has to be accomplished before CAR-T therapy is a real option for cancer patients.

Yet despite the many hurdles to come, the tantalizing potential of these CAR-T treatments has led to some big investments across the sector. Some of the other entrants: Carl June’s group at the University of Pennsylvania, which is collaborating with Novartis; Summit, NJ-based Celgene (NASDAQ: CELG), via a deal with Cambridge, MA-based gene therapy company Bluebird Bio (NASDAQ: BLUE); and Santa Monica, CA-based Kite Pharma (NASDAQ: KITE), which recently banked $128 million in one of the biggest biotech IPOs of the year. Pfizer also recently cut a deal with Paris-based Cellectis to tap into its CAR-T work.

The field has also spawned a big legal feud between Juno and Carl June’s group. UPenn and St. Jude Children’s Research Hospital had been battling over IP in the CAR-T field for a few years already; when St. Jude’s won a CAR-T patent in 2013, Juno licensed it and promised to cover most of the costs of its legal fight with Penn. Novartis has likewise stepped in on Penn’s side. That case is ongoing. Documents show a trial is set to begin in late February 2015. Bishop declined to comment on the status of the case, only saying “that process continues.”

According to Bishop, Juno is currently enrolling patients in three different clinical trials for different B-cell malignancies, including adult and pediatric ALL, and Non-Hodgkins Lymphoma. The three drug candidates Juno is testing in these studies are known as JCAR014, JCAR015, and JCAR017.

Juno is also developing therapies that use a second approach, so-called “high-affinity T-cell receptors,” or TCR, which aim for specific proteins inside tumor cells, rather than on their surface. But its CAR-T efforts have moved more quickly. The three drug candidates Juno is testing in trials so far are all CAR-T therapies, not TCR. Bishop declined to comment on the status of its TCR program except to say “a detailed update” will come by the end of the year.

The cash will help with those development efforts and presumably add to Juno’s fast-growing operation as well. Bishop declined to give a specific headcount, but he says new people are joining the company “pretty much every week.” That’s positive news for Seattle’s biotech scene, which took a big hit last week with the layoffs Amgen announced.

“It’s a very good thing for the region,” Nelsen says.