Nov. 19 (Bloomberg) -- Celgene Corp., the maker of thalidomide-based drugs for blood cancers, will acquire Pharmion Corp. for $2.9 billion to gain a leukemia treatment that helped patients in a study live longer.

Pharmion holders will get $72 a share in cash and stock, the companies said yesterday in a statement. The price is 46 percent higher than Pharmion's closing stock price of $49.28 on Nov. 16. Pharmion rose as much as 38 percent today.

Pharmion, based in Boulder, Colorado, holds European rights to Celgene's thalidomide drug for multiple myeloma and focuses on developing and acquiring products to treat blood diseases and cancer. The company makes Vidaza for myelodysplastic syndrome, a condition that can precede the blood cancer leukemia. The drug generated $33 million in U.S. sales in the third quarter, and an August study showed it can extend lives.

``It's a great move for Celgene,'' said Michael King, an analyst with Rodman & Renshaw in New York, in a telephone interview. ``Vidaza has the potential to be a billion-dollar product.''

The transaction, which has been approved by both companies' boards, is expected to be completed in the second quarter. The acquisition will diminish Celgene's earnings next year and add to them in 2009, according to the statement.

The deal will need to be approved by antitrust regulators in the U.S. and Europe, Celgene said today on a conference call with analysts. The company is confident it will pass the review, because it faces competition from Millennium Pharmaceuticals' Velcade and other products, said David Gryska, Celgene's chief financial officer, on the call.

Shares Rise

Summit, New Jersey-based Celgene rose 41 cents, or less than a percent, to $65.31 at 10:35 a.m. New York time in Nasdaq Stock Exchange composite trading. Pharmion jumped $18.23, or 37 percent, to $67.51, after trading as high today as $68.04.

Patients who took Pharmion's Vidaza in a clinical trial lived a median 24 months, compared with 15 months for those who took standard treatments, the company said in statement in August. Pharmion has said it plans to seek approval to market the product in Europe by the end of this year.

Before August, Pharmion's data showed the drug could slow down the progression of myelodysplastic syndrome, King said. Detailed results on its survival advantage are expected to be presented next month at the American Society of Hematology meeting in Atlanta.

Led by Vidaza, Pharmion generated $239 million in revenue in 2006. The company had a loss of $91 million last year, and an accumulated deficit of $263 million through the end of September, according to its most recent quarterly report.

Patient Numbers

About 50,000 to 75,000 patients are believed to have myelodysplastic syndrome in the U.S., and 75,000 to 80,000 have the disease in Europe, said Celgene chief executive Sol Barer, on the conference call.

``We think there is a substantial opportunity for Celgene to capitalize on the results,'' he said on the conference call.

By acquiring Pharmion's Vidaza, Celgene may be able to market its Revlimid medicine for less sick patients with myelodysplastic syndrome, then switch patients to Vidaza after they develop resistance, King said.

Pharmion has also applied for expanded approval of Thalidomide in Europe, for newly diagnosed patients, and expects to be able to market the product in March, April or May, said Patrick Mahaffy, Pharmion's chief executive officer.

Celgene fell the most in five years last month. Third- quarter sales of Revlimid, the company's biggest product, fell short of analysts' expectations.

``The acquisition of Pharmion is an exceptional strategic fit that will expand our role as a leader in hematology and oncology,'' said Barer, in a statement yesterday.

No Word on Job Cuts

Pharmion had 417 employees at the end of 2006, according to its annual report to the Securities and Exchange Commission. Celgene, which has 1,650 employees, didn't say in the statement whether it plans to make any job cuts in connection with the acquisition.

Celgene's buyout of Pharmion may put more pressure on rivals MGI Pharma Inc. and Supergen Inc., which make Dacogen for myelodysplastic syndrome. ``Now they will be up against the Celgene juggernaut,'' King said.

Celgene is the fourth-biggest biotechnology company by market value. It trails Genentech Inc., Amgen Inc. and Gilead Sciences Inc.

JP Morgan and Merrill Lynch advised Celgene on the transaction, and Banc of America Securities represented Pharmion.

To contact the reporter on this story: Luke Timmerman in San Francisco at ltimmerman@bloomberg.net.

Last Updated: November 19, 2007 10:43 EST