In response to accepting a buyout offer, shares of Juno Therapeutics (NASDAQ: JUNO), a clinical-stage biotech focused on immunotherapies, jumped 27% as of10:30 a.m. EST on Monday.
It appears that the rumor was true.
Investors learned on Monday that Juno accepted an all-cash buyout offer from biotech giant Celgene (NASDAQ:CELG). The deal is worth $9 billion, or $87 per share. That represents a 28% premium to Juno's closing price on Friday.
Here's what Juno's CEO Hans Bishop had to say about the deal:
"The people at Juno channel their passion for science and patients toward a common goal of finding cures by creating cell therapies that help people live longer, better lives. Continuing this work will take scientific prowess, manufacturing excellence, and global reach. This union will provide all three."
And here is Celgene's CEO Mark Alles' commentary on the acquisition:
"The acquisition of Juno builds on our shared vision to discover and develop transformative medicines for patients with incurable blood cancers. Juno's advanced cellular immunotherapy portfolio and research capabilities strengthen Celgene's global leadership in hematology and adds new drivers for growth beyond 2020."
As you would expect, Celgene did its best to share its rationale with investors as to why this deal makes sense:
- It positions Celgene at the "forefront of future advances in the science of cellular immunotherapy."
- JCAR017 -- which is Juno's most advanced CAR-T therapy -- holds promise to be a best-in-class treatment for non-Hodgkin lymphoma and should receive a regulatory decision in 2019. If all goes well, this therapy is expected to generate approximately $3 billion in peak sales.
- JCARH125 holds the potential to extend Celgene's lead in multiple myeloma.
- The deal promises to provide Celgene with further revenue diversification and additional avenues for growth in the 2020's.
- The recent changes to the U.S. tax code will allow the company to fund this deal in part with some of its international cash.
Celgene stated that it plans to the fund the transaction with a combination of cash on hand and from the issuance of new debt.
The deal is expected to close this quarter and has been approved by the boards of directors of both companies.
Celgene tweaked its near- and long-term financial guidance in response to the deal:
- The acquisition is expected to be dilutive to this year's EPS by approximately $0.50.
- The company expects the deal to be "additive" to its 2020 sales target, which calls for net product sales between $19 billion and $20 billion. Adjusted EPS in 2020 of "at least $12.50" was maintained. These figures represent compounded annual growth of 14.5% and 19%, respectively, from here.
Should investors applaud this buyout? This Fool thinks that the answer should be yes. CAR-T holds promise to be a game-changing treatment for several different types of cancer, so paying a premium for a drug program that has partially been de-risked makes sense to me. I also think that the acquisition price of $9 billion is reasonable given JCAR017's peak sales potential, not to mention the rest of the company's promising pipeline.
Count me as a Celgene bull.