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In: Opinions & Features

1.23.18 | Forbes

By Steve Brozak

To read the entire article on Forbes, please click here.

Celgene’s acquisition of Juno is probably the most anticipated acquisition of the last 24 months. Having previously made a $1 billion investment a little over two years ago, Celgene completed its courtship of the company yesterday in a $9 billion takeover. But the path to acquisition wasn’t straightforward (nothing really ever is when you’re dealing with biotech), and there was some doubt when Juno’s lead program, JCAR14, stumbled in the clinic, putting the company two years behind its competition, and casting a shadow over its next lead therapy, JCAR17.

A few years ago the rise of CAR-T technology was being whispered about in biotech circles as a potential Celgene killer. The biotech bellwether’s franchise had solidly dominated the blood cancer space as a near hegemon, but the rise of CAR-T and other immunotherapies over the last seven years threatened to shift entirely the way hematology and oncology are practiced. Meanwhile, Novartis and Gilead jumped feet first into the CAR-T space.

In 2012 Novartis entered into an alliance with the University of Pennsylvania, which included a $20 million investment by the pharmaceutical company. The Novartis-Penn Center for Advanced Cellular Therapeutics opened up four years later in 2016, and this past August, Novartis received the first FDA approval for a CAR-T cell therapy called Kymriah for pediatric B-cell acute lymphoblastic leukemia (ALL). The Novartis-Penn team-up was a landmark event in science and medicine which shouldn’t be overlooked for its significance. Novartis was the first major pharmaceutical company to fully enter CAR-T therapy arena, accelerating investment and development in the field, taking a build-it-and-they-will-come approach to big pharma concerns around an incredibly risky therapeutic approach with complicated manufacturing and product delivery process.

Compare Novartis’ transition to Bristol Myers Squibb, once considered the leader in immunotherapy, which has entangled itself in an attempt to use its successful checkpoint inhibitor programs to pivot the entire company into a “biopharma” company. The pivot is a business restructuring/re-branding process Bristol Myers Squibb kicked off 10 years ago with the fanfare of a new drug approval. Bristol Myers Squibb has also been locked in a duel with Merck with its checkpoint inhibitors, meanwhile Bristol’s once vaunted business development strategy of externally investing in smaller biotechs it referred to as its “string-of-pearls” has been crushed to dust. It should have been a company like BMS that entered full on in the immunotherapy realm.

Novartis’ unlikely entry and then approval must have sent the alarm bells ringing at Celgene. But it wasn’t until Gilead, one of biotech’s fiercest competitors, acquired Kite Pharmaceuticals, another CAR-T company, that Celgene was forced to protect its own position in the space and fully acquire Juno.  Gilead acquired Kite Pharma in August 2017 and received approval for its CAR-T product, Yescarta, in October 2017.

Celgene has been excoriated by the Street and armchair pundits for missteps the last two quarters. In Q3 2017, the company missed expectations for Otezla, a psoriasis drug, and then management significantly reduced its 2020 guidance. Investors were already nervous about the intellectual property status of multiple myeloma drug Revlimid, Celgene’s multi-billion blockbuster, when a phase 3 trial for an inflammatory bowel disease (IBD) drug also failed last October. Celgene paid over $710 million for what was at the time a Phase 1 drug tested in 15 patients the drug candidate. Data from a Phase 2 was still private, but Celgene had already reviewed the data form that trial when it decided to acquire the asset from little known Nogra Pharma, a Dublin based pharmaceutical company affiliated with Giuliani Pharma, an Italian based specialty pharmaceutical and consumer products company.

Celgene is a company that can afford to have the occasional big miss like its Nogra Pharma asset. However, it can’t afford to have more misses than hits, and the misses have been piling up leading to the Juno transaction. But Celgene’s business development team has been diligently at work, making highly strategic targeted investments in solid companies with emerging approaches as far back as 2010, investments which seeded the biotech IPO renaissance of 2013 and 2014.

Back in 2013 when the world was still recovering from a deep recession and when everyone thought the biotech markets were dead, a slate of Celgene backed companies began to go public. A little known company called bluebird bio was one of the first in the summer of 2013. bluebird bio is a groundbreaking gene therapy company with its scientific genealogy originating out of Baylor College of Medicine. Shortly after bluebird’s IPO, precision medicine company Agios Pharmaceuticals, another Celgene partnered company taking a systems biology approach to immune-oncology, went public. Acceleron Pharma, also a Celgene partnered company, went public later in 2013. Acceleron Pharma is a TGF-beta company that has several late phased drug trials including two in partnership with Celgene.  And these are just three of several dozen companies Celgene has partnered and can use long and valuable relationships with to mine and extract valuable technology from.

The prevailing argument among critics right now is that Celgene is misfiring, that the company has backed itself into a corner and has been forced to pay more in the short term than it should for Juno. My memory is a lot longer than most and, when taken in its totality, Celgene’s acquisition of Juno just lifted the entire sector once again and preserved its place as biotech’s bellwether.


WBB Asset Management Long/Short – Life Science Strategy (LSLSS) is long Juno Therapeutics.