Deals between development-stage biotechs and larger drug companies typically come in two flavors: either the larger company makes an outright acquisition, or it licenses the rights to drugs (or the future rights to drugs that are part of a discovery-stage deal.)
Unless you're Celgene (CELG) and Juno Therapeutics (JUNO), in which case you set up a convoluted 10-year deal with more moving parts than a wind-up watch being hurled across the room.
The monetary part of the deal is fairly straightforward, perhaps even less complex than typical deals with undisclosed milestone payments lovingly referred to as "biobucks" since they can't be spent yet. Instead of biobucks, Juno is getting cold hard cash (or at least a cold hard wire transfer).
Celgene is handing over $150 million upfront and will make an equity investment of about $850 million at $93 per share, about double where the stock closed on Monday. That's $1 billion that Juno will have in its coffers when the deal closes. And it could get more from Celgene if the company elects to increase its ownership and buy up to 30% of Juno's outstanding stock.
T-cells are at the heart of Juno's cancer immuno-cell therapy. Source: Juno Therapeutics.
The assets that will change hands are a little more convoluted, especially since many of them aren't known yet. Over the 10-year agreement, Celgene has the right to opt-in to develop Juno's immuno-cell therapy and autoimmune disease treatments by the end of phase 2 development. The earlier Celgene opts in, the lower the royalties Celgene will have to pay on sales outside of North America, starting in the high single digits and moving to the mid-teens; Juno retains rights to North America.
Celgene also has the right to select two programs on which to enter into global profit share agreements, but this option excludes Juno's CD19 and CD22 programs, which are only available for the geographic split. Under the global profit share agreement, the two companies split costs and profits equally, except in China. The agreement could be expanded to a third program "subject to additional obligations," whatever that means.
And the deal gets even more complex: Juno gains the rights to opt-in to develop some drug candidates that target T-cells, which are currently being developed by Celgene. For those assets, the costs and profits will be split 70%/30%, with Celgene taking the larger responsibility. The aforementioned 30% equity stake that Celgene can take in Juno is predicated on Juno opting into developing Celgene's assets.
All in the family
We've seen this kind of deal before; Roche and Genentech had a similar equity deal that gave it access to Genentech's oncology drugs outside the U.S., which worked out pretty well for everyone involved.
If the Celgene-Juno partnership goes similarly well, it's not hard to see Celgene eventually buying Juno down the line. Celgene could have just purchased Juno now, but the structure of the deal allows a lot more flexibility for Celgene -- it has to put up less capital up front to tie up Juno's assets, but gets to sit back and see how Juno's CAR-T immuno-cell therapy plays out. CAR-T is a relatively new technology -- Juno only became a company a year and a half ago -- so there's still plenty of risk.
The deal looks beneficial for Juno too. The new capital will help accelerate development of Juno's CAR-T therapies in its race with Novartis, Kite Pharma, and others. While investors would normally prefer to see non-dilutive financing, Juno is selling shares to Celgene at a much higher price than it could get in a secondary offering, so investors can't be too upset with the dilution.
