Juno Therapeutics, Inc. (JUNO) shares have soared more than 40% this week after Gilead Sciences, Inc. (GILD) announced a deal to acquire Kite Pharma, Inc. (KITE). Last year, Juno sued Kite over U.S. Patent No. 7,446,190, which covers a construct for a CD-19-targeted CAR-T cell treatment that employs a CD28 costimulatory domain. Juno has an exclusive license to the patent from the Sloan Kettering Institute for Cancer Research.
Juno believes that Kite's lead product candidate, KTE-C19 (axicabtagene ciloleucel), has infringed on its patent. In December of last year, the U.S. Patent and Trademark Office upheld all claims of Juno's patent, but the ruling is under appeal. Juno is seeking a declaratory judgment saying that KTE-C19 will infringe on the patent when commercially produced, but Kite plans to move forward with its biologics license application (BLA) submission in any case. (See also: New CAR-T Cell Therapy May Cure Tumors.)
From a technical standpoint, Juno stock rebounded from lower trendline support and broke out from upper trendline, R1 and R2 resistance this week. The relative strength index (RSI) appears extremely overbought at 85.73, but the moving average convergence divergence (MACD) experienced a bullish crossover. Traders should maintain a bullish bias on the stock given its fundamental potential but exercise some caution due to overbought conditions.
Traders should watch for some consolidation later this week given the overbought nature of the stock, with support near the $40.00 level or R2 support at $33.69. On the other hand, the stock could continue to rally to prior highs around $50.00 made in mid-2016. The short- to medium-term trend should remain favorable, as several analysts have upgraded the stock and increased their price targets following Gilead's acquisition of Kite Pharma. (For more, see: Why Gilead's Acquisition of Kite Is Not Enough.)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.