Celgene Inks Oncology Deal

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Celgene Corporation (CELG) recently inked a deal with German company MorphoSys to co-develop oncology candidate MOR202 on a global basis for treating patients with multiple myeloma and certain cancer forms. As per deal, the companies have also agreed to co-promote MOR202 in Europe for the above indications.

Celgene and MorphoSys will share the costs for developing the candidate on a 1/3:2/3 basis. MOR202, a human monoclonal antibody, is currently being evaluated in a phase I/IIa study for treating patients suffering from relapsed/refractory myeloma. The deal is worth up to $818 million, assuming all milestones are achieved.  

As per the terms of the deal, Celgene will make an upfront license payment of $92 million to the German company. Furthermore, the US based biopharmaceutical company will invest $60 million in order to subscribe the new shares of MorphoSys. The new shares will be issued at the price determined once the deal becomes effective. The companies said that the deal will become effective as soon as it is cleared by the antitrust authorities in the US under the Hart-Scott-Rodino Act. As per the deal, the price will include at least a 15% premium to MorphoSys’ closing price (prior to the deal being inked). This will benefit the shareholders of MorphoSys.

Moreover, MorphoSys is eligible to milestone payments from Celgene apart from tiered double-digit royalties on net sales of MOR202 (on approval) in markets outside Europe. The profits emanating from sales in the markets, where the companies will co-promote MOR202, will be shared equally.

We believe that the deal is also beneficial for Celgene which already has a strong oncology pipeline/product portfolio. Successful development and subsequent commercialization of MOR202 will further boost the company’s oncology portfolio.

Celgene carries a Zacks Rank #3 (Hold). Companies such as Biogen Idec Inc. (BIIB), Jazz Pharmaceuticals Public Limited Company (JAZZ) and Alnylam Pharmaceuticals, Inc. (ALNY) appear to be more attractive. While Alnylam Pharma carries a Zacks Rank #2 (Buy), Biogen Idec and Jazz Pharma carry a Zacks Rank #1 (Strong Buy).

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