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Friday, July 8, 2016

You don’t often get this kind of opportunities



The biotech company Juno specialized in the hot immunonco therapy, CAR-T technology, plunged 30% last night because a Phase 2 study has been put on hold due to 2 deaths reported . As soon as I saw the news post-marketing, I immediately went in to buy some JUNO around $29 via after-hours trading. I talked about this in WeChat  and immediately I got questions whether this was a wise move. The primary concern was whether the CAR-T technology has shown sufficient evidence of its clinical benefits when only a couple of hundreds of patients being tested and whether the fatality seen is a big problem with this therapy.

 

Let’s first be clear about one thing. As for any investigational drugs, the safety of the drug is critically important as its clinical benefits. No drug can be approved simply by its efficacy. If the risk (R) outweighs the benefit (B), the drug cannot be approved. The key is the ratio or balance of the two! Here is the tricky thing about the R/B ratio. There is a big difference in how to assess the R/B ratio depending on the nature of drugs under study. In general, the tolerability of risk is very low for drugs used for non-life-threatening diseases but the tolerability can be very high for life-saving drugs such as cancer therapy. For most of the drugs, one or a couple of deaths could easily kill the drug but for cancer drugs, deaths are usually not that “a big deal” and you hardly see a promising cancer drug got killed simply due to deaths or safety concerns. I think this can be easily understood. If a patient is facing death already, would he or she care so much whether the drug that could save his/her life may cause serious side effects or even death? Hardly! This can also explain why practising doctors in the US are generally facing a high risk of law suit but the risk is much less for oncologists even so the drugs they use often kill patients prematurely. As such, as long as a cancer drug has shown sufficient efficacy, the FDA will very unlikely kill the drug just because a few deaths were reported. You can be sure that the company will find a way to improve the safety profile and reduce the risk of fatality. Just to give you a real world example what I mean for that. The very first historical immunoonco therapy approved in the world, Yervoy (ipiliumumab for melanoma) is a great drug that can save or prolong life of many patients with this deadly cancer. But if you look at its label for the warnings, you will see Yervoy can cause deadly side effects such as liver failure or colon perforation. Yes, it is a challenge for the drug but certainly not a reason to disapprove it. That’s why I have much less concern about the fate of the CAR-T therapy from JUNO due to the deaths reported. So how about the efficacy part? Well, it is certainly premature to conclude this new therapy has no question about its efficacy. Ultimately JUNO or other companies developing this class of therapy must prove its clinical benefits. But here is the thing. We are not talking about a drug that is still in the lab stage tested only in animals. This therapy has shown quite promising efficacy in patients with advanced leukemia with 80-90% complete response rate for the first year and more sustained response rate around 50% after 2-3 years. Be aware these are the patients who have no available treatment options left and are close to death. You cannot find this kind of response rate if only due to a placebo (fake) effect. To me this is very assuring evidence that the therapy is truly working. Yes, the number of patients tested is quite small but this is under the orphan drug status and as such you don’t need a large number of patients in clinical trials for approval.

 

Taking all together, I think the market is overreacting to the bad news for JUNO as it typically does. It is definitely a setback for JUNO but so far I haven’t seen any concern (from efficacy) that the product may get killed. Boy, you don’t get a chance to buy a stock cheaply when everything goes very well as planned. You only get this rare opportunity when a company is facing some serious but temporary and solvable problems. I think JUNO is just at this status at the moment.  If you want to bet for this new technology, the market offers you a great entry point. JUNO is currently working with the FDA to revise the protocol and restart the study in probably less than 2 months. I suspect its share price will soon recover from its loss and may jump as the clinical hold is lifted, barring unexpected new safety concerns emerge. I bought more today!

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