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Celgene Acquires Company Investigating Cancer Warfare Drug

- By Yamil Berard

One of the largest biopharmaceutical players in the world, Celgene Corp. (CELG), has announced a $9 billion deal to acquire Juno Therapeutics Inc. (JUNO) as part of its plans to ramp up development of experimental blood-cancer drugs.

Buzz of the merger has been going on for weeks. Finally, today, the partners released details of the 10-year collaboration, which has been approved by the boards of directors of both companies.


Monday morning, shortly after the deal was made public, Juno's stock price jumped by 26.53% to $85.80 a share. The stock has been rising in price over the last week or so.

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Celgene, meanwhile, was mostly flat at $102.69 a share, down by 0.11% as of early this afternoon.

Based on its agreement with Juno, Celgene will make an initial payment of $1 billion, including the purchase of 9.1 million shares of Juno stock at $93 a share, with potential to increase its stake over time.

Both companies will hold a conference call at 5 p.m. Eastern, 2 p.m. Pacific to provide further details of the arrangement.

Bob Hugin, chairman and CEO of Celgene, released a statement today. It read: "This transaction strengthens Celgene's position in the emerging and transformative area of immuno-oncology."

Juno "has assembled world class experts and built impressive capabilities and technologies in the areas of T-cell biology and cellular therapy; we believe this long-term collaboration enhances the potential of both companies to deliver transformational therapies to patients with significant unmet medical needs."

Investor gurus

A number of guru investors hold the stock. They include Ken Fisher (Trades, Portfolio), Julian Robertson (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Ronald Muhlenkamp (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Ken Fisher (Trades, Portfolio).

The Summit, New Jersey-based company has a market cap of $81 billion.

It has a rating of 6 out of 10 in financial strength and 9 out of 10 in profitability and growth, according to GuruFocus.

The company's price-earnings ratio (P/E) is 24.29 or 66% lower than the industry.

Its price-book (P/B) ratio is 8.19 or 87% lower than the industry.

For its price-sales (P/S) ratio, the company reports 6.66 or 54% than the industry.

The return on equities is 44.77% or higher than 97% of its peers.

And the return on assets is 11.73% or higher than 90% of its peers.

Celgene stock is overpriced, based on the Peter Lynch chart below.

The median is $63.30 and it is trading at over $102 a share.

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GuruFocus shows Juno has a market cap of almost $10 billion. It has a financial strength of 7 of 10 and a profitability and growth of 2 out 10. Its ROE is -33.41% and its ROA is -25.66%.

The Seattle-based company is creating a new cancer drug that depends on a patient's own immune cells to do battle and destroy cancer. The therapies, known as CAR T-cells, are investigational and have not been approved by the Food and Drug Administration.

The deal still requires final close-out, which is expected later this year.

The parties are expected to share global costs and profits; 70% of profits will go to Celgene and 30% to Juno, Celgene announced today.

This article first appeared on GuruFocus.


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