By Ron Winslow and Joseph Walker
Celgene Corp. agreed to pay Juno Therapeutics Inc. $1 billion as
an initial investment in a 10-year collaboration that is the latest
and one of the most ambitious partnerships to develop treatments
that harness the immune system to fight cancer.
Under terms of the agreement, Celgene will pay Juno $150 million
in upfront fees, and purchase 9.1 million or $846.3 million of
newly issued shares, in exchange for the certain options to market
Juno's experimental immunotherapy treatments. Celgene agreed to pay
$93 per share, double Juno's closing price Monday of $46.30.
Juno shares rose 37% to $63.50 in after-hours trading.
The companies will initially focus on treatments Juno is
developing that involve genetically engineering immune-system
warriors called T cells to attack tumors, a hot and fast-moving
strategy that has shown promise in treating leukemia and other
cancers of the blood.
Executives said the pact would combine strengths of both
companies to speed development of such treatments and increase
their presence in the broader race to develop cancer-immunotherapy
treatments.
"We are now in a stronger than ever position to become a leader
in the cellular immunotherapy space," Hans Bishop, Juno's chief
executive officer, told analysts in a conference call announcing
the deal. "The collaboration also brings together unique and
complementary strengths that promise to create a leader in
immuno-oncology more broadly."
The agreement underscores growing interest in the bioengineered
T cell technologies, which ramp up the power of the cells to see
and attack tumors. Juno is competing against Novartis AG and Kite
Pharma to develop such cell therapy strategies.
Juno, based in Seattle, was launched just 19 months ago based on
discoveries by scientists at Fred Hutchinson Cancer Research,
Memorial Sloan Kettering Cancer Center and the Seattle Children's
Research Institute. It went public last December.
Juno doesn't have any drugs on the market, but expects to launch
a trial of a CAR T cell treatment in adult lymphoblastic leukemia
at midyear that could lead to approval in the U.S., Mr. Bishop
said. The U.S. Food and Drug Administration just accepted its
application to launch a trial of a second such agent in non-Hodgkin
lymphoma. Four treatments in solid tumors are expected to begin
clinical trials next year, he added.
Celgene gets the option to commercialize Juno's immunotherapy
agents outside the U.S. and to co-promote certain programs
globally. Juno in turn gets the option to co-develop and co-promote
certain Celgene agents. Celgene has the right to buy additional
shares at two specific times during the 10-year agreement with the
potential to acquire a 30% stake.
Celgene, based in Summit, N.J., has been on a deal-making spree
in recent years as the threat of generic competition to its biggest
drug by revenue, Revlimid, has loomed larger. Celgene derived
nearly a third of its $7.67 billion in global sales last year from
Revlimid, a blood-cancer treatment whose patents are being
challenged by generic drug makers.
As threats to Revlimid have grown, Celgene has undertaken an
aggressive research and development strategy, entering partnerships
with companies including Bluebird Bio Inc. and Agios
Pharmaceuticals Inc., that have expertise in promising, if risky
areas of biotechnology. From 2012 to 2014, Celgene paid more than
$1 billion in upfront payments to its collaborators, according to
Celgene's financial statements.
A cornerstone of Celgene's partnership strategy has been to make
equity investments in its R&D partners. Celgene's current
holdings include 14% of Agios's shares outstanding and a nearly 9%
stake in Epizyme Inc., according to FactSet.
Some analysts criticized the deal with Juno, arguing Celgene has
committed too much upfront money for an unproven technology.
"Celgene's management are to be congratulated on the audacity of
their deal making, but we expect investors to bridle at the
company's increasingly aggressive front-end loading of their
transactions," Geoffrey Porges, a Sanford C. Bernstein analyst,
said in a research note. "This transaction amounts to pre-paying
much of the cost of a distant asset well in advance of the delivery
of the asset."
Josh Beckerman contributed to this article
Write to Ron Winslow at ron.winslow@wsj.com and Joseph Walker at
joseph.walker@wsj.com
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