What You Ought To Know About Celgene's Deal-Making Magic

Celgene's investment team has made a string of savvy investments in early stage biotech companies.

Mar 5, 2014 at 6:30PM

Celgene (NASDAQ:CELG), the biotech giant best known for its $4 billion a year myeloma drug Revlimid, has been among the most active in making deals with young biotech companies.  In January, Celgene (NASDAQ:CELG) made its latest deal, handing over $50 million to cozy up to San-Diego based Abide.

The Abide deal continues Celgene's (NASDAQ:CELG) land grab for enzyme targeting therapies. But Celgene (NASDAQ:CELG) isn't the only one excited about enzyme and epigenetics research. Investors are increasingly intrigued by their potential, and that has Celgene (NASDAQ:CELG) sitting on handsome gains.

CELG Chart

CELG data by YCharts

Boosting its CNS pipeline
Celgene (NASDAQ:CELG) isn't the first to ink an agreement with Abide. Last May, Merck agreed to an arrangement that could be worth as much as $430 million to Abide if Abide's technology for targeting the serine hydrolases family of enzymes succeeds. That serine hydrolases family of enzymes is already the target of Merck's blockbuster DPP-4 diabetes drug Januvia.

While Merck is working with Abide on metabolics, Celgene (NASDAQ:CELG) has linked up with them on inflammation and immunology targets. Celgene (NASDAQ:CELG) is particularly interested in this area given its extensive investment in apremilast, a promising arthritis compound that may win FDA approval this year.

The most advanced compound in Abide's pipeline covered by Celgene's (NASDAQ:CELG) partnership is AB101131, a pre-clinical compound that the companies hope will enter human trials next year. In addition to taking a small equity stake, Celgene (NASDAQ:CELG) also retained an option to eventually buy Abide.

Irons in the fire
The Abide partnership builds on a string of deals Celgene (NASDAQ:CELG) has made over the past couple years, including a December investment in cancer focused stem cell researcher OncoMed Pharmaceuticals (NASDAQ:OMED).

Celgene (NASDAQ:CELG) agreed to pay OncoMed (NASDAQ:OMED) up to $3.15 billion in milestone payments if OncoMed (NASDAQ:OMED) can successfully bring compounds like demcizumab to market. Demcizumab is in phase 2 trials as a treatment for ovarian cancer, and is being studied in pancreatic, colorectal, and non-small cell lung cancer too.

Celgene (NASDAQ:CELG) paid Agios (NASDAQ:AGIO) $130 million in 2010 to partner on therapies that starve cancer of specific enzymes. Celgene (NASDAQ:CELG) handed over another $20 million in December to extend its arrangement with the epigentics cancer play for another year.

In addition to those deals, Celgene (NASDAQ:CELG) has teamed up with Epizyme(NASDAQ:EPZM)to develop an epigenetics treatment for mixed lineage leukemia, Blubird bio, and the privately held Acetylon. Blubird is working on gene-altering cancer therapies that reprogram T-cells to destroy cancer cells, while Acetylon is developing a myeloma compound.

Celgene (NASDAQ:CELG) is also working with Acceleron (NASDAQ:XLRN) on sotatercept, an anemia treating compound for rare diseases that the two companies have been developing since 2008. In 2011, Celgene (NASDAQ:CELG) expanded its relationship with Acceleron (NASDAQ:XLRN) to include another anemia drug, ACE-536.

Profiting in more ways than one
The following chart shows that shares in some of Celgene's (NASDAQ:CELG) partners have made a significant move since last fall. The gains make these partnerships even more intriguing given Celgene (NASDAQ:CELG) owns equity stakes in each of them.

OMED Chart

OMED data by YCharts

Celgene's (NASDAQ:CELG) $22 million investment in OncoMed (NASDAQ:OMED) shares at $15.13 per share has doubled.  Celgene (NASDAQ:CELG) also owns 12.5% of Epizyme (NASDAQ:EPZM), or 3.3 million shares. That position is paying off handsomely since December thanks to positive pipeline news lifting shares from $20 to $30.

Celgene (NASDAQ:CELG) also owns 666,667 shares of Acceleron (NASDAQ:XLRN) at roughly $15 per share. With shares trading near $50, that investment has more than tripled. And Agios (NASDAQ:AGIO) sold 708,333 shares to Celgene (NASDAQ:CELG) for $12.75 million or $18 per share last July, which means Celgene is up 67% on that position.

Fool-worthy final thoughts
All of these companies are working on pre-clinical or early to mid stage products, and none have any revenue outside of collaboration agreements.  That means they're all highly speculative.

As a result, Celgene's (NASDAQ:CELG) recent hot streak could as easily sour as soar. But for now Celgene's investment team is riding high and that's likely to keep Celgene (NASDAQ:CELG) making more deals this year.

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Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. Todd owns Gundalow Advisor's, LLC. Gundalow's clients do not have positions in the companies mentioned.The Motley Fool recommends Celgene. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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