Celgene Corporation (NASDAQ:CELG) Kicks Off J.P. Morgan With A Bang


We are about to kick things off for a fresh week of trading in the biotechnology space and, without a doubt, we are going to see one of the busiest weeks of the year in the sector play out across the next 3 to 5 days.

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Because this week sees the annual J.P. Morgan Healthcare Conference take place (this year, it’s in San Francisco), which is one of the biggest – if not the biggest – events on the biotechnology calendar of the year.

And, in line with this prediction, we’ve already seen a major development hit press, even before markets open in the US on Monday.

Here is what happened.

Celgene Corporation (NASDAQ:CELG) just announced that it has closed on a deal to acquire Impact Biomedicines as part of a deal worth $1.1 billion. Readers that haven’t heard of Impact Biomedicines can be forgiven – the company is a tiny startup biotechnology entity that celebrated raising $22 million as part of a series A financing back at the end of last year and, subsequently, boosted this total by around $90 million.

Even with a little over $110 million in financing, however, the company remains a tiny (previously) privately held startup, which is why the Celgene deal has come as such a surprise. More importantly, the $1.1 billion is an upfront payment (as is customary for this sort of acquisition type deal), valuing the company at more than ten times its recent financing round.

So why has Celgene fronted this amount of cash to pick up a company like Impact?

The answer is rooted in just one asset – a drug called fedratinib.

This was once a Sanofi SA (EPA:SAN) asset but the latter dropped it in favor of other programs, with Impact subsequently picking it up with the goal of picking up where Sanofi left off.

So that’s the asset, why is Celgene willing to take a $1.1 billion punt on it?

The drug is part of a family of assets called JAK2 inhibitors, which are a type of medication that functions by inhibiting the activity of one or more of the Janus kinase family of enzymes. These enzymes play a key role in what’s called the JAK-STAT signaling pathway. This pathway, in turn, plays a role in both the promotion of inflammation and the proliferation of certain cancer cells.

The idea, then, is that by inhibiting JAK2, any drugs that employ this mechanism of action (MOA) can serve to inhibit the progression of a range of diseases, including cancer and inflammatory diseases – two of the most prevalent and (by proxy) lucrative disease types in the healthcare world.

The initial target indication on this one is myelofibrosis, which was the primary target back when Sanofi was developing the drug. The latter dropped it based on some safety concerns, however, and subsequent to an FDA clinical hold placed on the development program. This hold is now lifted and Celgene thinks that it can overcome any safety concerns and get this asset to market in the US in the above-mentioned myelofibrosis indication, which is a more than one billion-dollar market in the US right now, near term.

So what comes next?

It’s all about whether Celgene thinks it needs to collect any more data. The company has already outlined expectations for the submission of a New Drug Application (NDA) at some point during 2018, which is suggestive of its belief that the data that already underpins this program (data from 877 patients across 18 trials) is sufficient to warrant an FDA green light in its target indication.

If this case, and based on a 2018 submission, we could be looking at a regulatory approval at some point during the mid to late 2019 and, subsequently, a relatively quick acquisition of market share based on the fact that the current standard of care (SOC) treatments in this space are drastically insufficient as far as long-term and effective treatment is concerned.

Keep in mind that this is just the first of what will likely be a spate of big-name deals set to hit press over the coming few days. We will be watching out for any fresh inputs and updating accordingly as they happen.

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