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Celgene (CELG), Jounce Strike Immunotherapy Collaboration

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Biotech company Celgene Corporation continues to pursue deals in the highly lucrative immuno-oncology space. In its latest deal, Celgene has paired up with Cambridge, MA-based privately held company Jounce Therapeutics, Inc. covering a global strategic collaboration focused on the development and commercialization of innovative immuno-oncology treatments for patients with cancer.

The deal gives Celgene options to jointly develop and commercialize Jounce’s lead candidate, JTX-2011, in addition to up to four early-stage programs to be selected from a defined pool of B cell, T regulatory cell and tumor-associated macrophage targets resulting from Jounce’s Translational Science Platform. It includes an additional option to equally share a checkpoint immuno-oncology program. If the option is exercised, Jounce will lead global development and U.S. commercialization of JTX-2011 as well as one additional collaboration program.

JTX-2011 is a monoclonal antibody targeting inducible T-cell co-stimulator (ICOS) with the candidate expected to enter the clinic in the second half of 2016. Per Jounce’s press release, it is being developed for the treatment of solid tumors as a single agent and in combination with other therapies.

Terms of the Deal

The deal with Jounce will see Celgene shelling out an upfront payment of $225 million and making an equity investment of $36 million in Jounce. In addition, Jounce will receive regulatory, development and net sales milestone payments that could amount to a total of $2.3 billion across all programs included in the collaboration upon hitting commercialization. Jounce is also eligible to receive tiered royalties on ex-U.S. sales.

The Jounce deal gives Celgene the option to opt in at defined stages of development across the programs. Under an opt-in setting, Celgene and Jounce will share U.S. profits and losses on all programs – Jounce will retain a 60% U.S. profit share of JTX-2011 with Celgene receiving the remaining 40%. For the first additional program, Celgene will get 75% of U.S. profit share with the balance 25% going to Jounce while, for up to three additional programs, U.S. profits will be shared equally.

The deal also spells out that all development costs will be shared in a way that is appropriate with product rights. While Celgene will gain exclusive ex-U.S. commercialization rights to each of the above programs, Jounce is eligible to get a royalty on any resulting ex-U.S. sales. Moreover, Celgene and Jounce will equally share profits globally for the checkpoint program.

Our Take

The Celgene-Jounce collaboration will see both companies leveraging their broad capabilities in immuno-oncology to develop new generation treatments of patients with cancer. Terms of the deal are lucrative for Jounce with the company eligible to receive billion dollars in payments as well as a strong partner in the form of Celgene.

Meanwhile, Celgene is looking to strengthen and bolster its immuno-oncology pipeline. The company has been actively striking deals to strengthen its foothold in this space. For instance, the company has partnerships with bluebird bio, Inc. (BLUE - Free Report) and Juno Therapeutics Inc. for the development of CAR T-cell therapies among other deals.

However, the deal comes for a considerable price given that the lead candidate is only one part of the program and is still in a pre-clinical stage of development.

We also note that interest in immuno-oncology is increasing with each passing day with several companies inking deals to tap this high revenue-potential market.

Celgene is currently a Zacks Rank #3 (Hold) stock. Fibrocell Science, Inc. is a better-ranked stock in the health care sector carrying a Zacks Rank #1 (Strong Buy).

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