The end of June marked another milestone for biotech blue-chip stock Celgene (NASDAQ:CELG), as it locked up yet another collaboration.
Its latest deal is with Juno Therapeutics (NASDAQ:JUNO), a clinical-stage biopharmaceutical company that's focusing its efforts on developing cancer immunotherapies -- a specific type of vaccine that enhances the ability of a patient's immune system to locate and fight cancer cells. Juno's drug development platform revolves around its chimeric antigen receptor (CAR) technology that works in conjunction with T-cells (also known as CAR-T) to better identify cancer cells and signal to the immune system to attack.
The 10-year deal between Celgene and Juno Therapeutics provides Juno with approximately $1 billion in cash in exchange for giving Celgene an equity stake and rights to several of Juno's drugs.
This isn't Celgene's first megadeal rodeo
This might seem like a large deal for Celgene, but it's actually been throwing around its weight for some time. In December 2013, Celgene and OncoMed Pharmaceuticals entered into a deal that could be worth, under utopian conditions, $3.3 billion for OncoMed.
Under the terms of that deal, Celgene agreed to pay OncoMed $155 million in upfront cash, take a $22.5 million equity stake in the company, and provide more than $3 billion in additional development, regulatory, and sales milestones for OncoMed based on the six cancer therapies they would be codeveloping.
OncoMed's potential claim to fame is its research on cancer stem cells, which like normal stem cells are believed to be responsible for cell differentiation. Cancer stem cells, or CSCs, are largely resistant to chemotherapy treatments, so killing them is difficult, and it's believed CSCs are responsible for tumor metastasis beyond the originating location.
Big dollar deals aren't as abnormal as you might think in the biotech or pharmaceutical sector. In August of last year, Sanofi agreed to a marketing deal with MannKind worth up to $925 million for inhaled diabetes drug Afrezza. In 2010 Arena Pharmaceuticals and Eisai forged a collaborative deal concerning lorcaserin (now Belviq) that could net Arena $1.37 billion in "other payments" on top of its royalties. Big deals are happening on a somewhat regular basis these days.
Celgene boldly goes where few have gone before
But where Celgene stands out from the crowd is in its willingness to dig its feet in while relying almost entirely on early stage clinical data.
It's easy for Big Pharma and biotech blue-chip companies to wait in the wings for small and midcap drug developers to prove that their therapies work and that their drug development platforms have value. On the other hand, waiting could allow the valuation in these companies to grow, making it potentially more expensive to license out these therapies following phase 3 data or an approval from the Food and Drug Administration.
Celgene, though, has shown no fear with regard to throwing its money at encouraging preclinical and early stage clinical data. That's the case with Juno Therapeutics, which is sitting on a relatively young, but diverse, portfolio of CD19 and WT-1-targeting CAR-T immunotherapies, and OncoMed which has just two products currently beyond the preclinical or phase 1 stage of research.
While I can't put words into the mouths of Celgene's management team, their collaborative thesis seems to involve a willingness to use their free cash flow if it targets a first-in-class pathway to treat cancer and/or inflammation.
Will Celgene's aggressiveness pay off?
The real question on everyone's minds is whether or not Celgene's willingness to bet on early stage data is a prudent or foolish move.
It's my belief that there's a precedent for early success within Celgene's collaborative pipeline, as well as among Celgene's peers, that suggest this could be a smart strategy.
Within Celgene's own collaborative pipeline, the initial data from its collaboration with Agios Pharmaceuticals looks promising. Recently-released results from the American Society of Clinical Oncology's annual meeting demonstrated that IDH2-mutant inhibitor AG-221 demonstrated an overall response rate of 40% on various types of blood cancers, including acute myeloid leukemia. If this overall response rate remains consistent in later-stage studies, we could be looking at a possible standard-of-care treatment for select leukemias. AG-120, an IDH1-mutant inhibitor didn't do too shabby either, with a 31% overall response rate in various blood cancers.
Keep in mind that not every one of Celgene's collaborative deals will wind up working out or paying off -- and I suspect even Celgene's management realizes this. However, it just needs to hit a homerun every now and then for its aggressive deal-making to pay off in the long run. For what it's worth, I'd opine that Celgene is on target to meet that success rate -- but as to which collaborations will pay off the most, that's really anyone's guess at this point.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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