Dublin-based Jazz said it will pay $30.25 per share for Ewing, N.J.-based Celator, 73% more than its $17.53 closing price on Monday.
The stock was trading at $1.64 as of March 14 but surged after Celator said phase III trials of its lead candidate, Vyxeos, to treat acute myeloid leukemia, showed the drug had prolonged patients' lives.
Jazz faces the prospect of a steep decline in revenue when its narcolepsy drug Xyrem loses patent protection from 2019 and has in recent months been engaged in court fights to stop generic manufacturers copying the medicine already.
Xyrem sales of $955 million in 2015 accounted for 72% of Jazz's total revenue.
Jazz said on Tuesday the purchase of Celator would broaden its hematology and oncology portfolio and generate unspecified synergies with its own "commercial expertise and infrastructure."
"Celator Pharmaceuticals is a strong strategic fit with Jazz Pharmaceuticals," said Jazz chairman and CEO Bruce Cozadd in a statement. "As Celator is currently preparing a regulatory submission in the U.S. for Vyxeos, this acquisition would add a new orphan product with the potential for short- and long-term revenue generation and expansion of our international commercial platform."
Vyxeos is an optimized reformulation of the cytarabine/daunorubicin chemotherapy cocktail (known colloquially as 7+3 after its dosing regimen) used for decades as the standard of care in elderly patients with acute myeloid leukemia, or AML, a cancer of the bone marrow which primarily affects older people.
Results from a phase III study of Vyxeos were announced in March. Treatment with Vyxeos reduced the risk of death by 31% compared with 7+3. The survival benefit favoring Vyxeos -- 3.6 months at the median -- was statistically significant, achieving the primary endpoint of the study. There were no substantial differences in the rate of adverse events between the two arms of the study, Celator said. Within 60 days of beginning treatment, 14% of Vyxeos patients died compared with 21% of 7+3 patients.
Vyxeos has breakthrough therapy designation from the FDA.
On Tuesday, Jazz did not provide any sales forecasts for Vyxeos but previously, Celator has said the drug could achieve U.S. and European Vyxeos sales in the range of $200-270 million based on the subset of AML patients enrolled in the phase III study. If use of Vyxeos is expanded into other AML patient populations, peak sales could reach $690 million to $780 million, according to Celator.
At $1.5 billion, Jazz is paying a lot to acquire Celator unless the use of Vyxeos can be expanded significantly. Jazz might also try to set a high sticker price for Vyxeos in order to boost sales -- a practice the company is well known for, particularly with Xyrem.
Jazz plans to acquire Celator through a tender offer and so-called second-step merger. Owners of 18.4% of the target's stock have already signed up to its bid. The purchase is expected to close in the third quarter. By the end of September the companies also expect Vyxeos to be submitted for U.S. regulatory approval. The acquisition would boost Jazz's non-GAAP adjusted earnings per share from 2018, the company added.
Celator has no revenue and made a $19.3 million net loss in 2015. At year-end it had net cash of $23.3 million.
Jazz shares closed on Monday at $152.09, up 68 cents, and giving it a market value of $9.2 billion.
The company moved its corporate headquarters to Dublin from Palo Alto, Calif. in 2012 with the purchase of Ireland's Azur Pharma.
In 2014 it bought Italian rare-disease specialist Gentium for $1 billion.
Jazz said it will pay for Celator with cash on hand and the proceeds of an existing debt facility.