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Celgene (CELG) to Acquire Juno Therapeutics for $9 Billion
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Celgene Corporation announced that it will acquire Juno Therapeutics, Inc. for $87 per share in cash, or a total of approximately $9 billion, net of cash and marketable securities acquired. The former already owns approximately 9.7% of outstanding shares of Juno.
Details of the Agreement
The transaction is expected to close in the first quarter of 2018. Celgene expects to fund the transaction through a combination of existing cash and new debt. The acquisition is expected to dilute the company’s bottom line in 2018 by approximately 50 cents and is expected to be incrementally additive to net product sales in 2020.
Strategic Value of the Acquisition
The acquisition is expected to position Celgene as a prominent company in the cellular immunotherapy space. Juno focuses on the development of CAR (chimeric antigen receptor) T and TCR (T cell receptor) therapeutics with a promising pipeline evaluating multiple targets and cancer indications. The acquisition will add JCAR017 (lisocabtagene maraleucel; liso-cel) to Celgene’s lymphoma pipeline. JCAR017 is a best-in-class CD19-directed CAR-T currently in a pivotal program for relapsed and/or refractory diffuse large B-cell lymphoma (DLBCL). The candidate is expected to obtain regulatory approval in the United States in 2019 with potential global peak sales of approximately $3 billion. Other candidate include JCARH125 for multiple myeloma
Celgene already has a collaboration and investment agreement with Juno for the development and commercialization of immunotherapies for cancer and autoimmune diseases. We remind investors that Celgene and Juno entered into a strategic collaboration in June 2015 whereby the companies will leverage T cell therapeutic strategies to develop treatments for cancer and autoimmune diseases with an initial focus on CAR-T and TCR technologies. Celgene exercised its option to develop and commercialize the Juno CD19 program outside North America and China in April 2016.
Our Take
Celgene is on the look-out of new deals and acquisitions given a lacklustre 2017. We note that the slowdown in mature products compelled prominent biotechs to acquire smaller ones with promising pipelines. Gilead Sciences, Inc. (GILD - Free Report) acquired Kite Pharma and subsequently obtained FDA approval of Yescarta (axicabtagene ciloleucel), the latter’s chimeric CAR-T therapy candidate.
Celgene’s stock has tumbled 8.6% over a year as against the industry’s gain of 10.3%. Celgene suffered a series of setbacks over the last few months. The company suffered a setback when a late stage study on its lead cancer drug Revlimid in combination with Rituxan failed. The threat of generic competition is also looming large on Revlimid which loses patent protection in 2022 forcing Celgene to look for acquisitions.
In January 2018, Celgene announced to acquire Impact Biomedicines for an upfront amount of $1.1 billion. The acquisition will add a late stage candidate, fedratinib, a highly selective JAK2 kinase inhibitor, to Celgene’s pipeline. The candidate is being developed for the treatment of myelofibrosis and polycythemia vera. Fedratinib demonstrated statistically significant improvements in the primary and secondary endpoints of splenic response and total symptom score, respectively in a randomized, placebo-controlled, phase III pivotal trial (JAKARTA-1) for treatment-naïve MF.
The CAR-T therapy space was in the spotlight in 2017 as the FDA approved the first CAR-T therapy, Kymriah for the treatment of patients upto 25 years of age with B-cell precursor acute lymphoblastic leukemia that is refractory or in second or later relapse stage.
Given the immense potential of the therapy, Celgene too wants to go the Gilead way. Meanwhile, Celgene also has a partnership with bluebird bio, Inc. (BLUE - Free Report) for CAR-T therapy candidates.
However, the acquisition of Juno might be a risky proposition for Celgene. Juno has faced setbacks with its pipeline candidate, JCAR015. In July 2016, Juno suffered a huge setback with the FDA placing a clinical hold on the company’s phase II study (ROCKET) on JCAR015 in adult patients with relapsed or refractory B cell acute lymphoblastic leukemia (r/r ALL). The hold was placed after two patients died within a week due to severe neurotoxicity following the addition of fludarabine to the pre-conditioning regimen. While the hold was lifted a week later and the study resumed under a revised protocol, the company voluntarily placed the study on hold again in November 2016 after two patients suffered cerebral edema. Subsequently, in March 2017, Juno announced that it has discontinued the development of the candidate. Moreover, the price of $87 per share represents a huge premium from Juno’s share price of $45.60 when the rumors of the acquisition had surfaced.
The biotech sector is likely to see a lot happening in the M&A front in 2018 given a dull 2017.
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Celgene (CELG) to Acquire Juno Therapeutics for $9 Billion
Celgene Corporation announced that it will acquire Juno Therapeutics, Inc. for $87 per share in cash, or a total of approximately $9 billion, net of cash and marketable securities acquired. The former already owns approximately 9.7% of outstanding shares of Juno.
Details of the Agreement
The transaction is expected to close in the first quarter of 2018. Celgene expects to fund the transaction through a combination of existing cash and new debt. The acquisition is expected to dilute the company’s bottom line in 2018 by approximately 50 cents and is expected to be incrementally additive to net product sales in 2020.
Strategic Value of the Acquisition
The acquisition is expected to position Celgene as a prominent company in the cellular immunotherapy space. Juno focuses on the development of CAR (chimeric antigen receptor) T and TCR (T cell receptor) therapeutics with a promising pipeline evaluating multiple targets and cancer indications. The acquisition will add JCAR017 (lisocabtagene maraleucel; liso-cel) to Celgene’s lymphoma pipeline. JCAR017 is a best-in-class CD19-directed CAR-T currently in a pivotal program for relapsed and/or refractory diffuse large B-cell lymphoma (DLBCL). The candidate is expected to obtain regulatory approval in the United States in 2019 with potential global peak sales of approximately $3 billion. Other candidate include JCARH125 for multiple myeloma
Celgene already has a collaboration and investment agreement with Juno for the development and commercialization of immunotherapies for cancer and autoimmune diseases. We remind investors that Celgene and Juno entered into a strategic collaboration in June 2015 whereby the companies will leverage T cell therapeutic strategies to develop treatments for cancer and autoimmune diseases with an initial focus on CAR-T and TCR technologies. Celgene exercised its option to develop and commercialize the Juno CD19 program outside North America and China in April 2016.
Our Take
Celgene is on the look-out of new deals and acquisitions given a lacklustre 2017. We note that the slowdown in mature products compelled prominent biotechs to acquire smaller ones with promising pipelines. Gilead Sciences, Inc. (GILD - Free Report) acquired Kite Pharma and subsequently obtained FDA approval of Yescarta (axicabtagene ciloleucel), the latter’s chimeric CAR-T therapy candidate.
Celgene’s stock has tumbled 8.6% over a year as against the industry’s gain of 10.3%. Celgene suffered a series of setbacks over the last few months. The company suffered a setback when a late stage study on its lead cancer drug Revlimid in combination with Rituxan failed. The threat of generic competition is also looming large on Revlimid which loses patent protection in 2022 forcing Celgene to look for acquisitions.
In January 2018, Celgene announced to acquire Impact Biomedicines for an upfront amount of $1.1 billion. The acquisition will add a late stage candidate, fedratinib, a highly selective JAK2 kinase inhibitor, to Celgene’s pipeline. The candidate is being developed for the treatment of myelofibrosis and polycythemia vera. Fedratinib demonstrated statistically significant improvements in the primary and secondary endpoints of splenic response and total symptom score, respectively in a randomized, placebo-controlled, phase III pivotal trial (JAKARTA-1) for treatment-naïve MF.
The CAR-T therapy space was in the spotlight in 2017 as the FDA approved the first CAR-T therapy, Kymriah for the treatment of patients upto 25 years of age with B-cell precursor acute lymphoblastic leukemia that is refractory or in second or later relapse stage.
Given the immense potential of the therapy, Celgene too wants to go the Gilead way. Meanwhile, Celgene also has a partnership with bluebird bio, Inc. (BLUE - Free Report) for CAR-T therapy candidates.
However, the acquisition of Juno might be a risky proposition for Celgene. Juno has faced setbacks with its pipeline candidate, JCAR015. In July 2016, Juno suffered a huge setback with the FDA placing a clinical hold on the company’s phase II study (ROCKET) on JCAR015 in adult patients with relapsed or refractory B cell acute lymphoblastic leukemia (r/r ALL). The hold was placed after two patients died within a week due to severe neurotoxicity following the addition of fludarabine to the pre-conditioning regimen. While the hold was lifted a week later and the study resumed under a revised protocol, the company voluntarily placed the study on hold again in November 2016 after two patients suffered cerebral edema. Subsequently, in March 2017, Juno announced that it has discontinued the development of the candidate. Moreover, the price of $87 per share represents a huge premium from Juno’s share price of $45.60 when the rumors of the acquisition had surfaced.
The biotech sector is likely to see a lot happening in the M&A front in 2018 given a dull 2017.
Zacks Rank
Celgene currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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