- Celgene Corp. will acquire Juno Therapeutics Inc. and its pipeline of cancer cell therapies for $9 billion, betting on the continued emergence of CAR-T at a time when concerns over future growth have shaken investor confidence in the blue chip biotech.
- At a takeout price of $87 per share, the deal values Juno at a nearly 91% premium to the company's share price before a report from The Wall Street Journal indicated Celgene was in talks to buy the CAR-T developer.
- Acquiring Juno hands Celgene full ownership of JCAR017, a CAR-T therapy in pivotal clinical testing for a type of lymphoma. Celgene expects to win U.S. approval for the treatment in 2019, positioning the biotech to compete with first-to-market companies Gilead Sciences Inc. and Novartis AG.
Celgene already had a sizable interest in the CAR-T space, having previously inked partnerships with Juno and bluebird bio Inc. to develop cell therapies targeting CD19 and the B-cell maturation antigen (BCMA). In that sense, buying Juno is a logical next step that capitalizes on the emerging profile for Juno's lead asset JCAR017 and its earlier candidate in multiple myeloma.
More broadly, the deal cements CAR-T as a foundational component of Celgene's plans for future growth. "We want to leapfrog from participating in CAR-T to driving in CAR-T," explained company CEO Mark Alles on a Jan. 22 call with analysts.
Celgene believes JCAR017, which has shown competitive-looking data in diffuse large B-cell lymphoma (DLBCL), could potentially earn $3 billion in peak annual sales — a higher estimate than the company gave just two weeks ago at the J.P. Morgan Healthcare Conference.
Under the past partnership with Juno, Celgene owned rights to JCAR017 outside of the U.S. market, with royalties on any future sales payable to Juno. Clinical development for the therapy is most advanced in the U.S., meaning Celgene could now see commercial returns more quickly than it would have previously. The company expects the acquisition to be incrementally additive to net product sales beginning in 2020.
Recent clinical results have boosted confidence in JCAR017's potential, showing strong efficacy in relapsed or refractory DLBCL in a relatively small study. Importantly, the treatment appears less risky than Gilead's rival CAR-T treatment Yescarta (axicabtagene ciloleucel) — although cross-trial comparisons are challenging due to differences in patient characteristics.
For CAR-T, safety of the cell therapy remains a key question and area for improvement. Both Gilead's and Novartis' (in acute lymphoblastic leukemia) treatments are currently approved in later lines of therapy, where patients have few remaining options. Moving earlier in the course of treatment would broaden CAR-T's potential commercial market, but brings with it a difference balance between benefit and risk for patients.
Both Celgene and Juno executives have touted JCAR017 as potentially "best-in-class" in the DLBCL market. If JCAR017's safety profile holds up in pivotal study, a less risky profile could be a key differentiating factor.
Currently, however, that bet on a best-in-class profile remains speculative, with only a limited data set to support it. And it's unclear how much better JCAR017 would need to be to unseat Gilead's Yescarta and, if approved in DLBCL later this year, Novartis' Kymriah (tisagenlecleucel).
Doubling down on multiple myeloma
Another key driver behind Juno's interest in acquiring Juno is the company's development of a CAR-T candidate targeting BCMA for treatment of multiple myeloma.
JCARH125, as it's known, remains very early-stage at this point. But clinical data on anti-BCMA candidates for multiple myeloma, particularly from Celgene's partner bluebird bio, have widely impressed and appear poised to add a powerful new approach to treating the blood cancer.
Even as Celgene develops new growth drivers in inflammation and immunology, multiple myeloma remains core the biotech's business. With the acquisition of Juno, Celgene broadens its stake in anti-BCMA CAR-T therapy, and hedges its bets with a second candidate in the wings behind bluebird's advancing bb2121.
(Under its deal with bluebird, Celgene exercised an option in 2016 to obtain global development and commercialization rights to bb2121).
While buying into JCARH125 does raise questions of how Celgene will balance its interest in two similar therapies, acquiring Juno could simplify things from an operational R&D perspective.
"Currently, from our understanding, Celgene employees that work on the bluebird collaboration cannot speak with the Celgene employees working on the Juno collaboration because of the competing BCMA products from the two companies," wrote Salim Syed, equity analyst at Mizuho Securities USA LLC, in a research note published prior to the deal. Acquiring Juno should in theory help lower that internal firewall.
Tax reform boost
Industry investors have been eager to see what impact the recently enacted tax reform package will have on industry M&A. Many biopharmas hold large piles of cash off shore to avoid paying high U.S. corporate taxes. With statutory rates now lowered, those companies will pay much less to use those financial resources domestically — sparking predictions of increased dealmaking this year.
That narrative now looks to be taking place as Celgene's deal for Juno followed closely on the heels Monday morning of Sanofi SA's $11.6 billion takeover of Bioverativ Inc.
"The unsung hero in this deal is tax reform," said Brad Loncar, an investor and founder of a cancer immunotherapy exchange-traded fund. "I'm not sure Celgene would be doing [this deal] today if tax reform didn't occur."
Celgene said it would fund the deal through existing cash and new debt. The company listed roughly $9 billion in cash held in foreign tax jurisdictions as of September 30, 2017.
Together, news of the Juno and Bioverativ deals pushed the Nasdaq Biotechnology Index up by more than 2% Monday morning.