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Celgene Deal for Pharmion a Strategic Fit: Analysts

Celgene's $2.9 billion acquisition of Pharmion would add products that fit snugly into its therapeutic focus on cancer and blood disorders, analysts said on Monday.

Celgene shares fell 90 cents, or 1.4 percent, to $64 in early premarket trading, possibly reflecting the deal price that some analysts called steep.

But the purchase, announced on Sunday, generally received praise from analysts for making strong strategic sense.

Celgene will acquire Vidaza, approved in the United States for myelodysplastic syndromes, a group of blood disorders that can lead to leukemia. Celgene had also licensed European rights to Pharmion to its thalidomide drug, which is under review there as a therapy for multiple myeloma.

Friedman Billings Ramsey analyst Jim Reddoch said those two products should add $1 billion in sales to Celgene by 2012.

"This is the ideal fit for them," Reddoch said in a research note. "The deal should be accretive by 2009, and Celgene will gain two major near-term revenue drivers in Vidaza and Thalidomide-Pharmion."

Reddoch also said Celgene will gain two important experimental drugs in Amrubicin, which is in late-stage study for lung cancer, and MGCD-0103, a cancer drug in mid-stage study.

The New Jersey-based company agreed to pay a 46 percent premium, based on Pharmion's closing price on Friday. Pharmion shares jumped 40 percent to $69 in premarket activity, below the offer price of $72 per share.

Chris Raymond, an analyst with Robert W. Baird, said Celgene was paying a stiff premium -- 11 times 2007 revenue estimates -- with Vidaza due to lose patent protection in 2011.

"While the addition of Vidaza and Thalidomide/Europe provides decent diversification, we think the price is steep for a company whose flagship (drug) loses patent protection in just 3.5 years," Raymond said in a research note.