CAR-T's explosion puts Juno and Kite under the M&A spotlight

The promise of new treatments that use the body's own immune cells to fight cancer has sent soaring the value of a handful of biotech startups, and analysts say Big Pharma may be waiting in the wings with buyout offers as the science continues to progress.

Leading the race to develop so-called CAR-T therapies are Juno Therapeutics ($JUNO) and Kite Pharma ($KITE), two fast-growing companies that went public last year and have seen their share values balloon ever since. Their pipeline treatments, which work by rewiring T cells to home in on tumors, have posted excellent results in early trials on blood cancers, and the treatments' potential could convince major drugmakers to pony up the billions it would take to buy them, analysts tell Bloomberg.

The likes of AstraZeneca ($AZN), Roche ($RHHBY) and Merck ($MRK) are paying close attention to the CAR-T space, according to the news service, allured by the promise of the newfangled treatments but cautious of overpaying for what remain unproven approaches to treating cancer. Juno, founded in late 2013, commands a market cap of nearly $4.7 billion, and Kite is worth roughly $2.7 billion, meaning any takeout offer would have to be a blockbuster affair.

As it stands, the industry's biggest players have been content to partner up in CAR-T without taking the plunge. AstraZeneca is collaborating with Juno, while Amgen ($AMGN) has paired off with Kite, Pfizer ($PFE) has aligned with Cellectis ($CLLS) and GlaxoSmithKline ($GSK) has an alliance with Adaptimmune ($ADAP), which is working in the related field of TCR therapies.

And that distance will likely remain until CAR-T biotechs can establish a reliable process for producing the complicated treatments, analysts told Bloomberg, as Big Pharma holds out for more evidence that clinical success can translate into commercial value. But, as with everything in biopharma, there is a natural gamesmanship: buy in too early and you could lose billions of dollars, but enter the field too late and you'll be stuck with less than favorable deal terms.

Investors, meanwhile, have more than warmed up to the idea of pharma buying its way into CAR-T. Last month, Juno's shares jumped more than 15% after AstraZeneca CEO Pascal Soriot absently mentioned that his company "would consider" buying Juno "if at some point we conclude we need to make an acquisition," a market reaction that reflects how the value CAR-T's early efficacy is perceived among traders.

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