Celgene Corp. (CELG) , which is diversifying away from its biggest-selling drug, Revlimid, could be closing in on one of its largest deals.
The Wall Street Journal reported Tuesday, Jan. 16, after the market close that Celgene was in discussions to acquire Seattle immunotherapy company Juno Therapeutics Inc. (JUNO) , with a deal potentially arriving in the coming weeks.
A Juno representative said the company does not comment on market rumors or speculation. A representative for Celgene did not immediately return a request for comment.
Shares of Juno were up 0.1% on Friday morning to $71.43. They soared 51.9% on Wednesday and an additional 3.1% Thursday on news of the potential sale.
Celgene's shares were up 0.7% Friday to $102.47 after shedding 2.7% on Wednesday.
Summit, N.J.-based Celgene "has been for many years on a path to find $10 billion or more of pipeline drugs to offset the [erosion of Revlimid revenue] starting in 2022," Jefferies LLC analyst Michael Yee told TheStreet.
Beginning that year, Celgene will face generic competition for Revlimid. The drug generated net sales of $8.19 billion in 2017, up 17% from 2016, according to preliminary results issued by Celgene on Jan. 8.
Revlimid is used for the treatment of multiple myeloma, myelodysplastic syndromes and mantle cell lymphoma. Myelodysplastic syndromes are a group of diseases affecting the soft tissue in the bones.
CEO Mark J. Alles "is tasked with the responsibility to ensure that the company has consistent growth over the 2020 to 2030 time frame in the face of [the upcoming decline in Revlimid revenue]," Yee said. "His success or failure will be defined in part by his ability to successfully execute on business development and M&A."
Alles has helmed Celgene since March 2016, a period that saw the company acquire venture capital-backed Delinia Inc. for up to $775 million and EngMab AG for $625.3 million, as well as this month agree to pay up to $7 billion for Impact Biomedicines.
Alles, a former captain in the U.S. Marine Corps and an alum of Bayer AG, Centocor Inc. and Aventis SA, joined Celgene in 2004 and initially served as vice president of global hematology marketing. He later became chief commercial officer and, before his promotion to CEO, president and COO.
If Celgene were to acquire Juno, the deal would come on the heels of the Impact deal, which includes an upfront payment of about $1.1 billion. San Diego-based Impact, a startup founded less than two years ago, is developing fedratinib for the treatment of myelofibrosis and polycythemia vera, a pair of bone-marrow disorders.
Celgene and Juno are no strangers. The companies in 2015 signed a 10-year collaboration agreement to develop and commercialize immunotherapies to treat cancer and autoimmune diseases. As part of the agreement, Celgene gained a roughly 9% stake in Juno for $1 billion and an option to commercialize Juno's programs outside North America. At the time, analysts suggested the partnership might be a precursor to a more formal tie-up between the two.
Celgene now appears to have a 9.76% stake in Juno, according to Juno's Securities and Exchange Commission filings.
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When Gilead Sciences Inc. (GILD) acquired cancer immunotherapy company Kite Pharma Inc. for $11.9 billion last October, analysts said they expected the deal to usher in more transactions in the biotech industry and pointed to Juno as a potential target.
In a note on Wednesday, Jefferies' Yee wrote that if Celgene paid $65 to $90 a share for Juno -- a premium of 50% to 100% to its unaffected stock price -- that would translate to $7 billion to $9 billion in enterprise value.
"Assuming an $8B deal this would be a discount to the KITE acquisition of $12B," he wrote. "However, CELG has 25-40% of the revenues already, as they have [outside the U.S.] rights and pays a royalty back to JUNO, who retains U.S. rights to the primary pipeline. Thus, if we gross it up to account for the revenue share, then an $8B deal makes sense, as that equates to around $12B like KITE, which had 100% rights, and JUNO has less data and is behind" Kite with its chimeric antigen receptor T-cell (CAR-T) program.
A marriage between Celgene and Juno also makes sense from a strategic standpoint, according to SunTrust Robinson Humphrey Inc. analyst Yatin Suneja. He noted that Celgene's bread and butter is hematology, and Juno's CAR-T program is designed to treat various forms of blood cancers.
CAR-T therapy involves extracting T-cells, a subset of white blood cells, from cancer patients. The cells are then altered to seek out the cancer and attack it. Once infused back into the patient, the cells reproduce at a fierce pace to fight cancer.
"If Celgene were to acquire Juno, there are a lot of synergies from a commercial standpoint," Suneja added. "Celgene can use its sales force to market Juno's products."
Juno's product candidates include JCAR017, a potential treatment for B-cell non-Hodgkin's lymphoma. Juno has said it expects to file a biologics license application for JCAR017 with the U.S. Food and Drug Administration in the second half of 2018, with approval as early as the end of 2018.
Kite's CAR-T therapy, Yescarta, was approved by the FDA in October for adults with relapsed or refractory large B-cell lymphoma.
Celgene's last major purchase was San Diego's Receptos Inc., which it acquired for $7.2 billion in August 2015. Celgene did that deal with the aim of enhancing its inflammation and immunology portfolio and further diversifying its revenue starting in 2019.
In October 2010, Celgene bought Abraxis Bioscience Inc., maker of cancer drug Abraxane, for up to $3.55 billion. Its other M&A activity includes its purchase of Avila Therapeutics Inc. in March 2012 for up to $925 million and Quanticel Pharmaceuticals Inc. in October 2015 for up to $481 million.
--Lisa Botter and Michael Brown contributed to this article