Celgene Corp. (CELG) has struck deals to acquire two biotech stocks this year, and since it's collaborating with some of the most intriguing young biotech stocks in the world, it has plenty of takeover candidates it can still consider. However, it doesn't look as if CRISPR Therapeutics (CRSP 2.78%) will be one of them. Celgene's been selling shares in that company since November.
Positioning itself for growth
Among its big-cap biotech peers, Celgene arguably boasts one of the most intriguing investment portfolios. It's long considered collaborations, including equity investments, as a key cog in its R&D strategy, and as a result, it's invested over $1 billion in a slate of emerging biotech stocks.
Celgene's investments are concentrated in blood disease, which isn't surprising given Celgene gets the bulk of its sales from drugs used to treat multiple myeloma, a type of cancer that forms in plasma cells. Celgene also tends to invest in game-changing companies working on drugs that can either expand its moat or move it into adjacent markets.
Perhaps there's no better example of its investment approach than Juno Therapeutics, which Celgene has just acquired for $9 billion. Before its acquisition, Celgene already owned almost 10% of Juno so that it could profit from Juno's research into chimeric antigen receptor T-cell therapies, or CAR-T, gene therapies. CAR-Ts were unproven when Celgene acquired its stake in Juno in 2015, but they're considered one of the most important advances in advanced B-cell cancer treatment today.
Falling out of favor?
Celgene usually invests with a buy-and-hold mentality, so its decision to sell CRISPR Therapeutics is notable.
CRISPR Therapeutics is one of only a handful of biotech companies developing a gene-editing technique called CRISPR-Cas9, which uses enzymes to cut away damaged genetic code to restore normal gene activity. It's thought that CRISPR-Cas9 could one day be used to overcome genetic mutations associated with many diseases; however, this research is only in its early stages.
In a move that's similar to how it approached CAR-T, Celgene acquired 4 million CRISPR Therapeutics shares in 2015 to get in on the ground floor of this research, and as of October 2016, Celgene owned 4.8 million shares, representing 12.3% of CRISPR Therapeutics' outstanding shares.
Celgene's interest in CRISPR Therapeutics appears to be waning. In early December, Celgene reported it had sold 1.1 million shares for $21.1 million in November, and in late December, it reported it had sold another 415,715 shares worth $8.2 million. Altogether, those sales reduced Celgene's ownership of CRISPR Therapeutics to about 3.3 million shares, or 8.1% of CRISPR Therapeutics shares outstanding.
At first blush, the selling suggests Celgene's souring on CRISPR-Cas9; however, it may be more reasonable to think that Celgene's selling is because of its decision to buy Juno Therapeutics, which has ties to Editas (EDIT -0.22%), a CRISPR Therapeutics competitor.
Juno Therapeutics has been working Editas since 2015, when it inked an exclusive agreement to leverage Editas CRISPR-Cas9 research to create next-generation CAR-Ts that can penetrate tumors. In August, Editas reported it had won a $2.5 million milestone payment from Juno for its progress toward overcoming the tumor microenvironment with CAR-T and T-cell receptor strategies, and previously, Editas said it's making progress toward achieving T-cell persistence, which is important in tackling tumors.
Editas may be becoming Celgene's preferred CRISPR/Cas9 partner, but that doesn't necessarily mean Celgene will sell all of its remaining CRISPR Therapeutics shares. Celgene could decide to sell remaining shares to take advantage of CRISPR Therapeutics' recent share price rally, or it could keep its remaining shares so that it can play both sides of the field. Regardless of what Celgene decides to do from here, it doesn't appear to me that the company is any less interested in CRISPR-Cas9. Instead, its deal with Juno has me thinking it's one of the best positioned to benefit if CRISPR/Cas9 is a success.