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Celgene Corporation (CELG - Analyst Report) and Agios Pharmaceuticals, Inc. (AGIO) extended the exclusivity period of their oncology deal by a year. The extension allows Celgene, a major player in the biopharma space, maintain its exclusive option to the candidates emanating from Agios’ cancer metabolism research platform through Apr 2015.

As a result of the extension of the cancer metabolism deal, originally announced in Apr 2010, Celgene will make a payment of $20 million to Agios, which went public in Jul 2013. Celgene has the option to extend the partnership by another year. Such an action will involve additional payments.

Agios stated in its press release that in Apr 2010 it had received an upfront payment worth $130 million (inclusive of an equity investment) from Celgene. Following the deal, Agios was responsible for research on the oncology candidates through phase I studies on the candidates. Celgene, the bigger biopharma company, had an option to obtain exclusive rights either upon the acceptance of the investigational new drug application or completion of phase I studies to develop and subsequently commercialize the drugs emanating from Agios’ cancer metabolism research program. Meanwhile, Agios retained the development and commercialization rights to some candidates in the U.S.  Agios is also eligible to receive royalties as a result of the deal apart from milestone payments. The exclusivity period of the deal was first extended in Oct 2011 (three to four years at that time).

The second extension of the deal with a big company like Celgene is a major positive for Agios. The extension, apart from strengthening Agios’ balance sheet, enables the smaller biopharma company to further utilize Celgene’s vast experience in the field of cancer.

We note that the extension of the deal with Agios comes close on the heels of Celgene’s oncology deal with OncoMed Pharmaceuticals, Inc. (OMED). OncoMed like Agios went public in July this year. Celgene inked a deal with OncoMed for the joint development and commercialization of up to six anti-cancer stem cell candidates from the latter's biologics pipeline.

Celgene carries a Zacks Rank #3 (Hold). Agios holds a Zacks Rank #4 (Sell). A better-ranked stock in the biopharma space is Actelion Ltd. (ALIOF), carrying a Zacks Rank #1 (Strong Buy).

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