Celgene places $1B bet on Juno Therapeutics

Celgene, one of the biggest names in the US biotech industry, has invested $1 billion in Juno Therapeutics, as part of a wide-ranging partnership that is seen as a strong vote of confidence in a new generation of experimental cancer treatments.

Juno Therapeutics jumped more than 40 per cent in after-hours trading in New York, after Celgene said it would pay $93 per share or $850 million for a 10 per cent stake, equivalent to a premium of around 100 per cent on its closing price.

The investment will make Celgene one of the most high-profile backers of a treatment known as "Car-T therapy", which involves extracting a cancer patient's white blood cells, re-engineering them in a laboratory to encourage them to attack tumors, and then reintroducing them into the body.

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As part of the 10-year deal, Celgene will also pay an upfront payment of $150 million in exchange for the rights to become the commercial partner on a range of Juno's products. It will take a seat on the company's board and has the option to purchase another 20 per cent at a later date.

Car-T is part of a class of medicines known as "immunotherapies", which aim to turn the body into a weapon against cancer rather than relying on traditional approaches like chemotherapy and radiotherapy.

Juno's technology has had some stunning successes, most notably in the treatment of blood cancers, but there are some who fret that it will not be as effective in the treatment of solid tumors, which account for the majority of cancer cases. Others worry it will prove too expensive to roll out on a large scale.

Those fears have led to a high degree of skepticism among some investors and a choppy ride for companies developing the technology. Before Celgene announced its stake, shares in Juno had fallen roughly 11 per cent since the start of the year.

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Hans Bishop, chief executive of Juno, told the FT: "Celgene is a world class oncology company that is investing a billion dollars in our company, and I do think that reinforces our belief in the potential of using Car-T in solid tumors."

"It's clearly a very significant deal financially, but more important is the potential of the science and the potential together to be a broader leader in the immuno-oncology space," he added.

The deal will be seen by Car-T's backers as a broader sign of confidence in the sector. Shares in Kite, a rival biotech company developing similar technology, jumped almost 10 per cent in after-hours trading.

However, the size of Celgene's investment in Juno took some analysts by surprise. It values the company at roughly $8 billion, around double its market capitalization when markets closed on Monday.

"This deal comes as a surprise to us given the very limited validation for Car-T cell approaches" outside some blood cancers, said Geoff Porges, an analyst at Bernstein, who also argued the large number of competitors in the area would ultimately erode the partnership's value.

"Juno's management and investors are to be congratulated for securing such favourable early financing for their company, well in advance of the delivery of much value from their platform," he said.

Founded in 1986, Celgene is seen as one of the cornerstone companies in the US biotech sector and ranks alongside Gilead, Amgen and Biogen as one of the "big four" groups with a market capitalization of almost $100 billion or over.

More recently, the company has become known for its big bets on experimental drugs, such as a deal worth up to $2.6bn to get access to a treatment for Crohn's being developed by Nogra Pharmaceuticals, a private biotech group in Dublin.

In April, it unveiled a deal with AstraZeneca, which saw it pay an upfront fee of $450 million to collaborate on one of its most promising immunotherapies. That partnership will be excluded from the agreement with Juno.