M&A

Is Juno worth a $10B-$12B buyout price? Analysts see megabucks deal in the making on reported Celgene talks

Just a week after bagging a blood cancer drug at the FDA’s threshold in a multibillion-dollar deal, Celgene is reportedly in talks to buy Juno Therapeutics in a move that would give it a major, late-stage effort on the CAR-T front.

The Wall Street Journal is reporting that sources close to the deal are telling them Celgene is in the hunt, and some analysts say that any final price could hit close to or even surpass the $10 billion mark.

A spokesperson for the biotech tells me that Juno doesn’t comment on market rumors. But you can believe that there are plenty of punters who are betting that there’s fire under all that billowing smoke. Juno’s shares are up 55% in premarket trading Wednesday. Before the big spike, its market cap sat at $5.2 billion.

Typically, with a market cap that big, a buyout could be expected to ring up around a 50% premium. But analysts who have been following these companies say that’s all wrong. Celgene, they say, paid $93 a share to buy into Juno, and they expect CEO Mark Alles to go all in on a deal that could range as high as $12 billion.

Michael Schmidt at Leerink noted:

If a deal happens likely depends on the price and if other bidders emerge. We’d be surprised if JUNO would accept an offer lower than KITE’s acquisition price of $11.9Bn, given the company’s high level conviction of having developed a best-in-class CAR-T platform and that CELG previously acquired 10% of JUNO shares at $93/share.

Celgene will clearly be focused on gaining the same cachet that Gilead found when it acquired Kite just ahead of its first landmark approval. But this one will take more time to bear regulatory fruit. Nevertheless, Geoffrey Porges also says it could wind up in the same ballpark as Gilead’s $12 billion deal to acquire Kite. He notes:

We would expect Celgene to pay up to at least the valuation where they made their prior investment ($93/share) in Juno. This would make it a ~$10bn transaction, or a 98% or 82% premium to Juno’s 30 day ($46.98) and 90 day ($50.82) trailing stock price. This would also, coincidentally, put the transaction price ($11bn gross with Juno’s cash) in the same range as the total payment by Gilead (GILD, MP) for Kite ($12bn), which also seems reasonable given the substantial similarity between the companies.

There’s likely to be plenty of kickback on that set of numbers, though. Juno’s stock has regained much of its lost value since the lead trial debacle, and paying double the current market cap would likely raise questions about Alles’ negotiating abilities. Bloomberg analyst Max Nisen counts himself among the skeptics, noting that Celgene itself has already projected peak sales for Juno’s JCAR017 at an unimpressive $1 billion.

Juno has also been spotlighting its own BCMA CAR-T, leaving Celgene — closely partnered with bluebird bio on a closely-watched BCMA program — with a potential problem that could lead to either eliminating one or seeing one go to another company.

Once a leader in the race to field the first CAR-T, Juno was slammed after its lead drug had to be scrapped following a string of deaths in the pivotal study. But armed with what it had learned in the process, the biotech was well along the way in mounting a comeback with a new lead therapy that has produced some stellar efficacy and safety data.

Mark Alles

Celgene, meanwhile, has been forced to mount a comeback effort of its own after Alles managed to rattle the market last year with a shaky financial performance that raised doubts about its continued fast growth. Much of its growth now is due to hiking the price of its franchise drug Revlimid. And after a late-stage test proved mongersen was a flop, most eyes had turned to upcoming data on ozanimod for proof that Celgene has the goods to please a demanding set of investors.

That set the stage for last week’s $1.1 billion upfront deal to acquire Impact, a company that had been newly floated to take a second stab at running the myelofibrosis drug fedratinib back in front of FDA regulators after John Hood, a co-inventor, made the case that the safety issues that had torpedoed the drug at Sanofi were inaccurate.

In their abstract out for ASH last fall, Juno execs spelled out a key piece of data for the high dose arm of the early study on JCAR017. Zeroing in on that one snapshot, researchers say they tracked an 80% overall response rate and a 73% complete response rate at 3 months for the high dose among a “pivotal core” group of 15 patients.

But Brad Loncar, an independent investor who set up the Loncar Cancer Immunotherapy ETF $CNCR, hasn’t been a big fan of Juno’s.


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