Celgene Gets Global Oomph From Pharmion Deal

Biotech firm Celgene(CELG Quote) is buying Pharmion(PHRM Quote) in a $2.9 billion cash-and-stock transaction that merges two fast-growing marketers of blood cancer drugs and gives an immediate boost to Celgene's nascent European commercial operations.

Celgene has agreed to pay $72 a share for Pharmion, a 46% premium over the company's closing price Friday. Pharmion shareholders will receive $25 in cash and $47 in Celgene stock, with the exact number of shares to be determined later.

Celgene says the purchase of Pharmion will be dilutive to earnings in 2008, accretive in 2009.

Pharmion shares closed Friday at $49.28. Celgene shares closed at $64.90.

By purchasing Pharmion, Celgene accelerates its goal of becoming a global marketer of blood cancer drugs. Both companies already sell their respective products globally, but Pharmion has an established and strong sales force in Europe. Celgene recently started building its own European commercial operations but progress there has been a bit slower than expected.

For this, Celgene is paying a hefty premium -- more than 11 times Pharmion's $256 million in trailing 12 month revenue.

But Pharmion is growing quickly, fueled by sales of Vidaza, a treatment for myelodysplastic syndrome (MDS), a pre-cancerous blood cell disease. Pharmion also sells Thalomid, a drug used to treat patients with multiple myeloma, a cancer that attacks bone marrow.

Pharmion is expected to lose $1.30 a share on revenue of $267 million this year, growing to a profit of 25 cents a share on revenue of $387 million in 2008, according to the consensus analyst estimates compiled by Thomson Financial.

Celgene and Pharmion are already business partners. Pharmion sells Thalomid in Europe through a commercial license granted by Celgene, which owns the drug and sells it in the U.S. Pharmion is in the process of seeking European approval to market Thalomid in newly diagnosed multiple myeloma patients. Vidaza is sold in the United States only, although Pharmion is expected to file for European approval by the end of the year.