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Celgene to acquire Juno for $9 billion
February 2018
by Jeffrey Bouley  |  Email the author
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SUMMIT, N.J. & SEATTLE—In June 2015, Celgene Corp. and Juno Therapeutics Inc. entered into a strategic collaboration under which the two companies would leverage T cell therapeutic strategies to develop treatments for patients with cancer and autoimmune diseases, with an initial focus on chimeric antigen receptor T cell (CAR-T) and T cell receptor (TCR) technologies. In April 2016, Celgene exercised its option to develop and commercialize the Juno CD19 program outside of North America and China.
 
And now, in early 2018, Celgene and Juno have signed a definitive merger agreement under which Celgene has agreed to acquire Juno for $87 per share in cash, or a total of approximately $9 billion—the largest acquisition in Celgene’s history—net of cash and marketable securities acquired and Juno shares already owned by Celgene (approximately 9.7 percent of outstanding shares). The transaction was approved by the boards of directors of both companies.
 
As Celgene puts it, “Juno is a pioneer in the development of CAR T and TCR therapeutics, with a broad, novel portfolio evaluating multiple targets and cancer indications. Adding to Celgene’s lymphoma program, JCAR017 (lisocabtagene maraleucel; liso-cel) represents a potentially best-in-class CD19-directed CAR-T currently in a pivotal program for relapsed and/or refractory diffuse large B cell lymphoma (DLBCL). Regulatory approval for JCAR017 in the U.S. is expected in 2019, with potential global peak sales of approximately $3 billion.”
 
The acquisition is expected to be dilutive to adjusted earnings per share (EPS) in 2018 by approximately $0.50 and is expected to be incrementally additive to net product sales in 2020. There is no change to the previously disclosed 2020 financial targets of total net product sales of $19 billion to $20 billion and adjusted EPS greater than $12.50.
 
“The acquisition of Juno builds on our shared vision to discover and develop transformative medicines for patients with incurable blood cancers,” said Mark J. Alles, Celgene’s CEO. “Juno’s advanced cellular immunotherapy portfolio and research capabilities strengthen Celgene’s global leadership in hematology and add new drivers for growth beyond 2020.”
 
“The people at Juno channel their passion for science and patients towards a common goal of finding cures by creating cell therapies that help people live longer, better lives,” added Hans Bishop, Juno’s president and CEO. “Continuing this work will take scientific prowess, manufacturing excellence and global reach. This union will provide all three.”
 
The acquisition will also add a novel scientific platform and scalable manufacturing capabilities that are expected to complement Celgene’s leadership in hematology and oncology. In collaboration with Juno’s team in Seattle, Celgene plans to expand its existing center of excellence for immuno-oncology translational medicine by leveraging Juno’s research and development facility in Seattle as well as Juno’s manufacturing facility in Bothell, Wash.
 
As Brian Feroldi wrote on The Motley Fool website following the announcement, one reason to cheer for this deal is that it offers the right products, noting that “JCAR017 successfully outperformed both Yescarta and Kymriah in the two metrics that matter most to healthcare providers and patients: efficacy and safety,” suggesting that JCAR017 could be the top CAR-T therapy if it wins approval. Feroldi’s analysis also argues that the price is right and the time is right for this deal.
 
However, the acquisition deal might be a risky proposition for Celgene, counters Zacks Investment Research, commenting in an investor’s note that “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.”
 
But Celgene is in a race to diversify its portfolio before patent protection ends for its best-selling blood-cancer drug, Revlimid, and various analysts qualify the acquisition of Juno a smart call, with analysts at Jeffries explaining, “the buyout would enable Celgene to integrate Juno’s entire cell therapy platform and bring it all in house.”
 
Upon completion of the acquisition of Juno, Celgene says that it will be positioned to become a preeminent cellular immunotherapy company. The strategic advantages of this acquisition will include the opportunity to:
  • Leverage a novel scientific platform and scalable manufacturing capabilities to position Celgene at the forefront of future advances in the science of cellular immunotherapy
  • Accelerate Juno’s pipeline development to capture the full potential of cellular immunotherapy
  • JCAR017, a pivotal-stage asset with an emerging favorable profile in DLBCL, is expected to add approximately $3 billion in peak sales and significantly strengthen Celgene’s lymphoma portfolio
  • JCARH125 will enhance Celgene’s campaign against BCMA (B cell maturation antigen), a key target in multiple myeloma
  • Additional cellular therapy assets in proof-of-concept trials for hematologic malignancies and solid tumors will add to Celgene’s existing pipeline
  • Accelerate revenue diversification with meaningful growth drivers beyond 2020
  • Capture 100 percent of the global economics on all Juno’s cellular immunotherapy assets
Celgene expects to fund the transaction through a combination of existing cash and new debt. The resulting capital structure, the acquiring company says, will be consistent with Celgene’s historical financial strategy and strong investment grade profile, providing the financial flexibility to pursue Celgene’s strategic priorities and take actions to drive post-2020 growth.
 
Code: E021827

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