With $9 Billion Juno Deal, Celgene Doubles Down on Cancer
(Bloomberg) -- Celgene Corp. made one of its largest deals ever with the $9 billion acquisition of Juno Therapeutics Inc., placing a costly bet on cutting-edge cancer treatments.
Celgene will gain research into a novel class of therapies known as CAR-T that use the body’s own immune system cells to fight cancer. The Summit, New Jersey-based company will pay $87 a share in cash, according to a statement Monday. That’s 91 percent above Juno’s closing price Jan. 16, the last trading day before the Wall Street Journal reported the companies were in talks.
“The clear message from Celgene is that they are making a big bet on the future of cell therapy," said Jefferies analyst Michael Yee, who advises buying Celgene stock. “This transaction could be seen as expensive until they show that this brings something else to the table.”
Celgene is doubling down on cancer drugs after suffering a major setback last year that sent its market value tumbling. The company’s top-selling blood cancer drug, Revlimid, is expected to face competition in about four years, and the failure of a high-profile experimental candidate for Crohn’s disease in a late-stage trial in October heightened the pressure to find new drivers for long-term growth.
The two firms already had ties. They first struck a partnership in 2015 to research cancer treatments, and Celgene is Seattle-based Juno’s largest shareholder, with a stake of about 10 percent.
Juno’s stock rose 27 percent to $86.11 at 9:41 a.m. in New York. Celgene fell 1.6 percent to $100.99.
The deal may signal that health-care M&A is picking up after a sluggish 2017. Just a few hours before the Celgene-Juno transaction was announced on Monday, French giant Sanofi agreed to buy U.S. biotech Bioverativ Inc. for $11.6 billion to add treatments for hemophilia.
The extra activity sent the deals volume in U.S. biotechnology so far this quarter to its highest level since the entire third quarter of 2010, according to data compiled by Bloomberg.
The purchase of Juno, shortly after Celgene agreed to buy Impact Biomedicines Inc. for at least $1.1 billion, is part of Celgene’s plan to help offset lost revenue from Revlimid once copycat drugs are on the market.
CAR-Ts are bespoke treatments that re-engineer the body’s own immune system cells to make them attack cancers, and, so far, they have shown the biggest promise in blood cancers, a disease area in which Celgene specializes.
It’s also a breakthrough field. The first CAR-T to win approval from U.S. regulators was a Novartis AG treatment, last August, followed in October by Yescarta, a product Gilead Sciences Inc. had just bought as part of its $12 billion acquisition of Kite Pharma.
Juno’s JCAR017 is expected to be approved in the U.S. by 2019 and sales will peak at $3 billion beyond 2020, Celgene said. The takeover will allow Celgene to become a leader in the CAR-T area of cancer research, including the potential for the treatment of solid tumors, for which there are no current such therapies on the market, Celgene Chief Executive Officer Mark Alles said in a conference call.
“We want to leapfrog from participating in CAR-T to shaping CAR-T,” he said. “The Juno combination of scientists’ technology, with our interest and our approach to solid tumor drug development, really gives us a chance to be at the forefront of shaping how CAR-T therapy ends up treating solid tumors."
The value of the deal is net of cash and marketable securities held by Juno, and of Juno shares already owned by Celgene. The transaction was approved by the boards of directors of both companies.
The transaction is expected to close in the first quarter. J.P. Morgan Securities LLC is advising Celgene and Morgan Stanley & Co. LLC is working for Juno. Celgene’s legal counsel is Proskauer Rose LLP and Hogan Lovells, while Juno is working with Skadden, Arps, Slate, Meagher and Flom, LLP.
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