Celgene Corp.’s June 29 tie-up with CAR-T pioneer Juno Therapeutics Inc. may have set a new high for upfront payments, according to the Strategic Transactions database, but the collaboration gives it first pick from a hotly anticipated pipeline and came through a competitive process, Celgene executives told “The Pink Sheet.”

“We really feel this is reflective of the value of the collaboration and is consistent with the market now in immuno-oncology,” Robert Hershberg, Celgene’s senior VP of immuno-oncology, said in an interview. “When you look at the structure of this deal, a 10-year collaboration, access broadly to the Juno platform for that 10-year period, the ability to opt in for worldwide rights for up to three programs and also importantly, the ability to take equity, I think this is a very competitive deal. I don’t think we overpaid.”

It helps that with its rich cash stockpile, Celgene can afford to invest; the company had $7.31 billion in cash and equivalents at the end of the first quarter.

The upfront includes approximately $150 million in cash and the purchase of more than 9 million shares of Juno stock at $93 per share, double the closing price of the stock on June 29 and amounting to nearly $850 million. [See Deal]

In exchange, Celgene will have the option to commercialize any of Juno’s oncology and cell therapy autoimmune product candidates, including the chimeric antigen receptor T-cell (CAR-T) and T-cell receptor (TCR) platforms, after Phase II.

One of the elements of the deal is that the two partners will work together on future business development exploring T-cells in oncology.

The deal already includes Juno’s lead drug JCAR015, which Celgene licensed outright along with another CD22-directed CAR-T. The deal excludes one candidate, a B-cell maturation antigen (BCMA), due to a conflict with another one of Celgene’s partners, bluebird bio Inc. The company also previously was partnered with bluebird in a CAR-T oncology alliance but amended the agreement to exclusively focus on the BCMA program earlier this year [See Deal].

Juno will be responsible for research and development in North America and retain commercialization rights in those territories, while Celgene will have the option for the development and commercialization of drugs in the rest of the world. Celgene will pay Juno a royalty on sales in those territories. Celgene also will be able to select two programs, excluding CD19 and CD22, to be subject to a global profit-sharing agreement under which the companies will share expenses and profits worldwide equally.

Juno also gets certain rights to Celgene’s oncology portfolio, including the option to develop and commercialize T-cell-directed therapies that originate from Celgene. In those instances, Celgene will share global costs and profits with 70% allocated to Celgene and 30% allocated to Juno.

In regards to Celgene’s equity stake in Juno, Celgene will gain the right to nominate a member to Juno’s board of directors and also will have the right to purchase additional equity in Juno during specified windows at a specified market premium, based on pre-determined conditions, including Juno opting in on select Celgene programs. Celgene could own up to 30% of Juno at a maximum.

“There is a very clear shared vision in terms of the long-term view in this space and the need to really explore not just CAR-T cells but also how biologics and small molecules complement this space,” Hershberg said. One of the elements of the deal is that the two partners will work together on future business development exploring T-cells in oncology.

Celgene has shown before that it is willing to sign front-end-loaded deals. Celgene paid $710 million to Nogra Pharma Ltd. in a 2014 licensing arrangement for a drug for Crohn’s disease and ulcerative colitis [See Deal]. Given the high stakes wager, the drug, GED-0301, has now become a high-profile product in Celgene’s pipeline. Phase III trials testing the drug in Crohn’s disease are expected to begin in mid-2015.

The Celgene/Nogra deal set a new record for biopharma licensing upfronts at the time, but was eclipsed shortly after by Pfizer Inc. when the big pharma paid $850 million to license Merck KGAA’s PD-L1 antibody last year [See Deal].

Despite the high cost of the deal, analysts were largely positive on the collaboration.

“With consummation of the deal, we see Celgene as exposed to a best-in-class adoptive cell therapy (ACT) platform with resources to fully develop CAR-T and TCR technology optimally against what we believe to be a high hurdle in solid tumors,” BMO Capital markets analyst Jim Birchenough said in a June 30 research note. “Ultimately, we believe that Celgene’s immuno-oncology platform has been underestimated.”

JMP Securities analyst Michael King noted, “We view this partnership as a strategic collaboration for Celgene in establishing a solid foothold in the burgeoning cellular-based immunotherapy market and, in our view, will help to maintain its dominant position in current and future oncology indications.”

The Bang For Celgene’s Buck: Looking Inside The Record-Setting Juno Deal

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