UPDATED: Celgene pays $1B in landmark deal to buy into Juno's pipeline of CAR-T drugs

Celgene ($CELG) is paying about $1 billion to move to the front of the hectic race to build new CAR-T cancer therapies. The Big Biotech is shelling out $150 million upfront and paying $93 a share--a huge premium--to snap up 9.1 million shares of Juno Therapeutics ($JUNO), inking a global collaboration to develop and commercialize new immuno-oncology therapies.

The deal--which also covers Juno's work on TCRs--gives Celgene 10% of Juno's stock and an option on co-commercializing the biotech's oncology and cell therapy autoimmune product candidates, including Juno's lead CD19 and CD22 directed CAR-T product candidates. B-cell maturation antigen, or BCMA, is excluded as a target in this collaboration. And the aggressive, hematology-focused execs at Celgene also gained the right to boost their ownership of Juno to a hefty 30% of all outstanding shares over the 10-year term of the deal while appointing R&D director Tom Daniel as a director on Juno's board.

The deal puts a bright spotlight on the hot R&D race to develop new drugs that re-engineer T cells, arming them with chimeric antigen receptors so that they target cancer cells. Juno and Novartis ($NVS) are widely viewed as the leaders in the field, with Juno vaulting from a startup to a major new force in the biotech world in less than two years--an unprecedented achievement in the industry.

Juno's shares rocketed up 45% on the news after the market closed Monday, pushing them past the $65 mark and closer to the big premium that Celgene is paying. Juno's stock closed at $46.30 on Monday. The big gains couldn't sustain the pushback against the deal terms from a host of analysts who questioned the buy in, though. By mid-morning Tuesday that big increase was pared back to 20%.

Juno CEO Hans Bishop

Juno CEO Hans Bishop said in a call Monday evening that the biotech specifically selected Celgene as its big commercialization partner because of its considerable clinical and scientific strengths.

Celgene CEO Bob Hugin

"We're only starting to understand the full impact" of this therapeutic approach, added Celgene CEO Bob Hugin, who has lavished billions on a wide variety of deals in recent years. Even by that standard, though, the deal with Juno is a standout. A slate of new deals is expected to start generating significant revenue by 2020, says Hugin, who's attempting to position his company to maintain a high-growth trajectory.

Celgene deal czar George Golumbeski told analysts that the deal was a work in progress which would almost certainly evolve over time as the partners added new technologies and worked to stay ahead of rivals in the market.

Juno's initial approach, supported by investigators at Memorial Sloan-Kettering and the Fred Hutchinson Cancer Research Center, has been to target hematological malignancies like acute lymphoblastic leukemia and non-Hodgkin lymphoma. There's been early, jaw-dropping data to support their work extracting T cells from patients, adapting them and then reinjecting them back into patients. But the field is moving so fast that analysts and the company have moved on to start work on later tech waves that could include solid tumors, broadening the approach while looking for ways to corral severe adverse events, especially cytokine storms that can kill some patients.

In a nutshell, the pact leaves Juno responsible for R&D in North America and will retain commercialization rights in those territories. In addition:

  • Celgene will be responsible for development and commercialization in the rest of the world, and will pay Juno a royalty on sales.
  • Celgene will initially be eligible to select two programs, excluding CD19 and CD22, to be subject to a global profit-sharing agreement under which the companies will share worldwide expenses and profits equally, except in China. Subject to additional obligations, Celgene may select a third program.

Juno in turn will gain a co-development and co-commercialization option on some of Celgene's new drugs that target T cells. For any Celgene-originated programs co-developed under the collaboration, the two partners will share global costs and profits with 70% allocated to Celgene and 30% allocated to Juno while Celgene will lead global development and commercialization, subject to a Juno co-promote option in the U.S. and some EU territories.

The whole field of T-cell R&D got a boost from the news. Rival Kite Pharma ($KITE) saw its shares jump 7%, as investors began to speculate on the other big-dollar deals that could be inspired by today's pact.

But despite the surge of enthusiasm among the partners, Bernstein's Geoffrey Porges immediately raised questions about the long-term value of the deal.

Noted Porges: "This deal comes as a surprise to us given the very limited validation for CAR-T cell approaches, or TCR technologies, outside their core CD19 indication, as well as the many competitors actively engaged in the field and likely to erode its ultimate value." Porges added that the pact leaves Celgene in a unique position in the cancer field, noting its recent $450 million deal to partner with AstraZeneca ($AZN) on its PD-L1 program.

"This unique collaboration is designed to catalyze and create tremendous ongoing scientific and product development synergy by leveraging each company's strengths and assets," noted Bishop. "In addition to its established global presence and commercial reach, Celgene has leading small molecule and protein capabilities that complement Juno's advanced engineered T cell capabilities. By doing this together, we believe we can more quickly and effectively develop potentially disruptive therapies in this new field of medicine and make them more readily available to patients worldwide."

- here's the release

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