Celgene to Buy Cancer-Drug Maker Impact for $1.1 Billion

Updated on
  • Additional payments could bring total price to $7 billion
  • Celgene is seeking to diversify from its top-selling Revlimid

Celgene Corp. agreed to buy closely held Impact Biomedicines for $1.1 billion upfront to gain an experimental blood cancer treatment. The price could reach as much as $7 billion over time if the drug reaches certain milestones.

Under the agreement, Celgene will add as much as $1.25 billion to the upfront payment if Impact’s drug fedratinib reaches approval milestones to treat myelofibrosis, a form of bone marrow cancer, and another $150 million for other indications. Additional payments could reach as much as $4.5 billion if global annual sales rise above $5 billion, according to a statement Sunday.

The total price would make Impact one of Celgene’s biggest acquisitions ever. The drugmaker is under increasing pressure to replace revenue from its top-selling cancer treatment before copycat medicines eat into Revlimid sales. Its stock lost more than a quarter of its value during a five-day stretch in October, after a highly anticipated drug for Crohn’s disease failed a late-stage trial and the drugmaker cut its 2020 profit target.

The shares haven’t recovered all of the lost ground, and as of Friday traded 28 percent below their 2017 peak of early October, giving Celgene a market value of about $83 billion. After news of the deal broke, shares climbed as high as $106.88 in premarket trading on Monday, and were recently up less than 1 percent at $105.80.

Jefferies analyst Michael Yee said in an email that the company “wisely structured” the deal to base much of its value on sales milestones, and isn’t overpaying for a late-stage asset.

The Summit, New Jersey-based company has made a series of acquisitions and signed partnerships in recent years to bring in new drug candidates. Those include ozanimod, which it gained through the $7.2 billion purchase of Receptos Inc. in 2015 and is being tested in Crohn’s disease, ulcerative colitis and multiple sclerosis.

Chief Executive Officer Mark Alles has pledged to look outside Celgene’s own labs for new drugs to bolster its pipeline, telling investors in October that “we look for opportunity all the time.”

Impact, based in San Diego, was founded in 2016 by Chief Executive Officer John Hood and other executives. For Hood, it will be the second time he’s been involved in the sale of fedratinib. He was a co-inventor of the drug while working at TargeGen Inc., according to Impact’s website. French drugmaker Sanofi acquired TargeGen in 2010 for an upfront payment of $75 million.

Sanofi dropped development of fedratinib in 2013 after some patients in clinical trials suffered a neurological condition known as Wernicke’s encephalopathy that prompted the FDA to put the studies on hold. Impact’s founders acquired the rights to the drug from Sanofi and formed the company in 2016. Impact was able to get the FDA to allow trials to proceed after showing that the rate of Wernicke’s encephalopathy in the trial wasn’t unusual for a patient population of that size, Umer Raffat, an analyst at Evercore ISI, said in a note to clients.

Besides the founders, investors in Impact include venture capital firm Medicxi. Credit Suisse Group AG and Hogan Lovells advised Celgene while Impact worked with PJT Partners Inc. and Latham & Watkins LLP.

The acquisition announcement comes as JPMorgan Chase & Co.’s annual health-care investment conference, a key deal-making venue, kicks off Monday in San Francisco.

— With assistance by Aaron Kirchfeld, Ed Hammond, Caroline Chen, Phil Serafino, and Ivan Levingston

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