Celgene, Sutro Join Forces

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Celgene Corporation (CELG) recently collaborated with Sutro Biopharma for the development of novel antibody drug conjugates (ADCs) and bispecific antibodies for two undisclosed targets and for the manufacturing of a proprietary Celgene antibody.

As per the terms of the agreement Celgene will be making an upfront payment to Sutro along with payments on the achievement of research, development and regulatory milestones and an equity investment in Celgene. The deal can well be worth over $500 million, depending on the success of the aforementioned programs. Celgene will also be paying royalties on product sales.

By virtue of the collaboration, Sutro will design products and use its proprietary, cell-free protein synthesis technology to produce preclinical materials.

We note that Celgene have clinched several deals and acquisitions in recent years. In April 2012 the company inked a collaboration and licensing deal with Epizyme Inc, for the discovery, development and commercialization of personalized medicines for treating patients suffering from genetically defined cancers by inhibiting histone methyltransferases (HMTs), an important epigenetic target class.

Moreover, in March 2012, the company acquired Avila Therapeutics. The acquisition has added AVL-292, developed for treating cancer and autoimmune diseases, to the company’s pipeline.

We are impressed with Celgene’s efforts to bolster its pipeline by prudent acquisitions and deals.

We currently have a Neutral recommendation on Celgene. The stock carries a Zacks #3 Rank (Hold) in the short run. Another biopharma company Acorda Therapeutics Inc. (ACOR) carries a Zacks #2 Rank (Buy) in the short run.

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