Celgene (NASDAQ:CELG), a biotech company, said yesterday that it would pay about $1 billion to start a collaboration with Juno Therapeutics (NASDAQ:JUNO), a leader in the area of cancer drugs that harness patients’ immune systems to attack tumors. Juno shares soar in morning trading.
Most of the $1 billion Celgene will pay will go toward acquiring about 9.1 million shares of Juno at $93 a share. That is about double the price at which Juno closed yesterday, before rising about 40 percent after hours.
Juno will be responsible for research and development in North America and will keep commercial rights there, while Celgene will be responsible for the rest of the world, the companies said in a statement yesterday.
The deal gives Celgene the right to pick two products to share costs and profits with Juno. If both options are exercised Celgene will pay $100 million, according to a filing. Celgene will have to pay more the longer it waits to choose the products.
Shares of Juno advanced 25.7 percent to $58.55 at 9:36 a.m. in New York. Shares of Celgene were up 0.6 percent at $115.53.
At the heart of the deal are new treatments that use Chimeric Antigen Receptor Technology (CAR-T) and T Cell Receptor (TCR) technologies, red-hot areas of immunotherapy that have driven up the share prices of several small companies, such as Juno, Kite Pharma Inc and Bluebird Bio Inc.
The partnership with Juno will likely yield approved treatments by 2020, Celgene Chief Executive Officer Bob Hugin said on a call with investors.
Celgene, which said it does not expect deal costs to affect near-term profit and loss, will have the option to buy up to 30 percent of Juno's common stock between the ninth and 10th year of the collaboration, provided it exercises an option to raise its stake to 19.9 percent between years four and five.
Celgene will also add its head of research and development, Tom Daniel, to Juno’s board.
The deal with Celgene could help Juno better compete with Novartis, the Swiss pharmaceutical giant, which is developing similar treatments.
No such drug is approved for sale yet, but in small clinical trials, the approach has led to some substantial remissions among patients with various blood cancers.