Celgene to Pay Juno $1 Billion as Part of 10-Year Collaboration

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 [e-mail] and Joseph Walker at [e-mail]

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