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

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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