Here's Why Jounce Therapeutics Fell Over 38% Today

What happened

Shares of clinical-stage biopharma Jounce Therapeutics (NASDAQ: JNCE) dropped over 38% today after the company released preliminary results for its lead drug candidate's performance in a phase 1/2 study. The drug candidate, JTX-2011, failed to deliver robust patient responses either as a stand-alone treatment or in combination with Opdivo from Bristol-Myers Squibb against a range of solid tumor cancers. To be fair, a few weeks ago management hinted that underwhelming results were headed investors' way.

It's a big deal for two reasons. First, Jounce Therapeutics has a multibillion-dollar deal with Celgene to co-develop and market a number of drugs that might advance from the tiny company's pipeline. JTX-2011 is central to that partnership. Second, the company's next most developed drug candidate is still in preclinical trials, so investors -- and Celgene -- now might be forced to wait around years longer for a successfully commercialized product.

As of 1:27 p.m. EDT, the stock had settled to a 37.2% loss.

A chart drawn on a chalkboard showing a negative slope.

Image source: Getty Images.

So what

Jounce Therapeutics has positioned its platform as a novel combination of immunotherapy, bioinformatics, and controlling the tumor microenvironment. Biology is proving much more difficult to corral.

Here's how JTX-2011 performed in the phase 2 portion of the trial for various cancer types among patients taking either the monotherapy (only JTX-2011) or the combination with Opdivo. Jounce Therapeutics has released partial response (PR) rates, which describe the number of patients who experienced shrinking tumors, and disease control rates, which is the number of PRs plus the number of patients with stable disease at nine weeks or later:

Cancer Type	Monotherapy PR	Combination Therapy PR	Disease Control
Gastric cancer	1 in 8 (12.5%)	1 in 28 (3.5%)	10 of 28 (35.7%)
Triple-negative breast cancer	N/A	1 in 17 (5.9%)	3 of 17 (17.7%)
Head and neck squamous cell cancer	N/A	N/A	2 of 16 (12.5%)
Non-small cell lung cancer	N/A	N/A	7 of 12 (58.3%)

Data source: Press release.

These data simply aren't very good (robust PRs would exceed 30%, with disease control rates greater than 50% across the board) and don't provide a lot of confidence or wiggle room to move this program forward.

Now what

Jounce Therapeutics thinks there may be a path forward in certain subpopulations of patients, but investors are writing off JTX-2011 almost entirely. The company's market cap has sunk to $230 million -- below the cash position of $237 million reported at the end of March. Investors might be right: There's a long and expensive path forward for this biopharma, so that cash will probably evaporate before the next major clinical catalyst arrives.

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Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Celgene. The Motley Fool has a disclosure policy.