The acquisition values Los Angeles-based Abraxis at $71.93 a share, 17 percent more than yesterday’s closing price on the Nasdaq Stock Market. That calculation excludes the value of tradable rights that Abraxis shareholders will receive.
Celgene, which markets the best-selling pill Revlimid, will gain the drug Abraxane, approved by U.S. regulators for treating metastatic breast cancer. The medicine brought in $315 million in sales last year, 88 percent of Abraxis’s revenue, and is in testing for lung and pancreatic tumors. Celgene has been making acquisitions to expand in oncology, and Abraxane enables it to broaden from hematology treatments into solid tumors.
“Abraxane appears to be a good strategic fit for Celgene’s oncology franchise and appears poised for growth via label expansions, and broader geographic promotion,” said Eric Schmidt, an analyst at Cowen & Co. LLC in New York, in a note to investors today. “On the negative side, Celgene is paying a substantial premium,” he said.
The acquisition probably will close in the fourth quarter, the companies said. The purchase will reduce earnings at Summit, New Jersey-based Celgene next year, and will increase profit in 2012, the companies said in a statement.
“Executing this plan will create significant value and afford us the potential to grow Abraxane to $1 billion in revenue in 2015,” said Robert Hugin, Celgene’s president and chief executive officer, on a conference call today.
Each Abraxis share will be converted into $58 a share in cash and 0.2617 of a Celgene share, according to the statement. The stock portion of the deal is valued at $13.93 a share based on yesterday’s closing price for Celgene.
Abraxis holders also will receive one contingent value right per share that entitles them to payments if the company’s Abraxane drug is approved by U.S. regulators for lung and pancreatic cancer, and royalties if the treatment and other products meet sales goals. Abraxis has five compounds in various stages of development, all focused in solid tumors.
Morgan Stanley & Co. was the financial adviser to Celgene on the transaction. Lazard Freres & Co., Goldman, Sachs & Co., and BofA Merrill Lynch acted as co-financial advisers to Abraxis.
Celgene fell $2.42, or 4.6 percent, to $50.82 at 4 p.m. in Nasdaq Stock Market composite trading. Abraxis rose $12.89, or 21 percent, to $74.20.
Abraxane’s “nab” technology combines the proven chemotherapy paclitaxel with the protein albumin, enabling the drug to be given at a higher dose and breach blood vessel walls more effectively, according to the company. Celgene may explore the application of this technology to other compounds, including its experimental lung-cancer therapy amrubicin, said Geoffrey Porges, an analyst at Sanford C Bernstein & Co. in New York, in a note to investors today.
At a meeting of the American Society of Clinical Oncology earlier this month, Abraxis presented data from a study that found Abraxane benefitted more than one-third of pancreatic- cancer patients who didn’t respond to a standard treatment. The company also presented the results of a late-stage trial that showed Abraxane worked better than paclitaxel as a first-line treatment for lung cancer.
Celgene’s two top-selling drugs are Revlimid and Thalomid, which are treatments for multiple myeloma. They brought in more than 80 percent of the company’s $2.69 billion in 2009 revenue. In January, Celgene acquired closely held Gloucester Pharmaceuticals Inc. for $340 million, gaining the marketed lymphoma drug Istodax.