Biotechnology company Celgene said Wednesday it is expanding its array of cancer treatments with a deal to buy Abraxis BioScience Inc. for $2.9 billion in cash and stock.
Celgene Corp. said the transaction could add $1 billion to its annual sales by 2015. The company is hoping it will be able to "re-energize" sales of Abraxis' only approved drug, the breast cancer treatment Abraxane, and also win approval for Abraxane as a treatment for skin, lung, and pancreatic cancer. If that happens, the value of the deal could grow to more than $3.55 billion.
Cancer treatments are expensive and they are a major area of growth in the drug industry, which makes them a tempting target for buyers like Celgene.
Abraxane is an injectable drug that is approved as a treatment for breast cancer in patients who have not been helped by other drugs.
Celgene, the maker of Revlimid and Vidaza, said that under terms of the deal, shareholders of Abraxis will receive $58 and 0.2617 shares of Celgene for each Abraxis share they own. That values Abraxis at $71.93 per share based on Celgene's latest closing price. That is a 17 percent premium above Abraxis' closing price of $61.31 on Tuesday.
In midday trading Wednesday, Abraxis shares climbed $13.22, or 22 percent, to $74.53 after rising as high as $74.55 earlier in the session. The stock has traded between $24.52 and $63.75 over the last year. Celgene shares slipped $2.03, or 3.8 percent, to $51.21.
Celgene will pay Abraxis $250 million if Abraxane is approved as a treatment for non-small cell lung cancer and $300 million if it is approved to treat pancreatic cancer. If the pancreatic cancer approval comes by April 1, 2013, Celgene will pay another $100 million. The deal also includes potential royalty payments. Celgene won't have to make the additional payments if Abraxane does not work better than competing drugs in clinical trials.
Sales of Abraxane slowed after AstraZeneca PLC ended a marketing partnership with Abraxis in late 2008. They are down 6 percent since then and totaled $87.9 million in the first quarter.
Abraxane and Abraxis' drug candidates are based on technology designed to attack tumors more quickly by homing in on the protein albumin and delivering targeted doses of the cancer treatment paclitaxel.
Earlier this month, Abraxis said a late-stage trial showed therapy including Abraxane significantly improved the effectiveness of lung cancer treatment. It presented data earlier this year showing that pancreatic cancer patients who took Abraxane lived longer. It is enrolling patients in a late-stage trial.
Celgene said it plans to file for approval of Abraxane in lung cancer early next year.
Celgene's top seller is Revlimid, which is approved to treat the blood cancer multiple myeloma, and one type of the bone barrow disease myelodysplastic syndrome. The company reported $530 million in Revlimid sales in the first quarter, along with $120 million in sales of Vidaza, which is used against acute myeloid leukemia and five types of myelodysplastic syndrome, and $104 million from the multiple myeloma drug Thalomid.
Abraxis BioScience Inc. is based in Los Angeles and has about 900 employees. During a conference call, the companies did not discuss any potential job cuts.
Celgene, of Summit, N.J., said the deal should close in the fourth quarter. The boards of both companies have approved the sale, and the agreement requires approval by shareholders of Abraxis Bioscience and regulators.
Celgene said the purchase will reduce its 2010 net income by as much as 10 cents per share. Excluding the costs of the deal, it backed its adjusted forecast of $2.60 to $2.65 per share. Celgene expects the deal to add to profit in 2011.
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