Juno Therapeutics Inc (NASDAQ:JUNO) shares spiked nearly 50 percent in Wednesday’s trading session on a WSJ report that Celgene (NASDAQ:CELG) could be in discussions to acquire the 90% of JUNO that it does not already own. Recall, CELG is already a 10% shareholder in Juno, as a result of a collaboration it made in mid-2015. There were no terms noted in the report, but based on the current stock price, investors expect a deal that would be valued at ~$7.5 billion.
“Arguably, Celgene is getting Juno at a discount (assuming a 40-45% premium), for a potentially best in class CART,” says Mizuho analyst Salim Syed. “One way to look at valuation here is to simply look at what GILD paid for Kite. (i.e. both Kite and Juno have a CART drug, with Kite being ahead given it’s already on the market for DLBCL). GILD paid $11.9Bn for a CART. CELG would be paying ~$7.5Bn for a CART (assuming a 45% premium) … not to mention again also obtaining a BCMA. On one hand GILD’s CART is already on the market. On the other hand, Juno despite being third to market, arguably has the best-in-class compound. Looking at 6-month CR rates in DLBCL (GILD 31% (n=77), NVS 30% (n=46), Juno 50% (n=14)) … we emphasize the word “arguably” here given the “n” or sample size in the Juno data is much less.” Syed continues.
However, Syed admits, “CELG already has a decent collaboration with Juno, arguably, and therefore did not need to do this deal. Recall, CELG is already a 10% shareholder in Juno, as a result of a collaboration it made in mid-2015. As part of that deal, Juno retained North American rights to its CD19/CD22 CART products. CELG got ROW rights with a high single digit to mid-teens royalty going back to Juno.”
Cantor analyst Mara Goldstein opines, “Given CELG’s financial flexibility and cash flow, we see such an acquisition of this size potentially doable for CELG (recall that the Receptos acquisition was $7 bln). CELG already has ex-US commercialization rights to select JUNO candidates, and potential co-promotion rights in the U.S. to others. CELG paid $93/share for a 10% stake in JUNO when the deal was struck in 2015.”
Wall Street is predominantly showcasing positive sentiment on the biotech firm, with TipRanks analytics demonstrating JUNO as a Buy. Based on 12 analysts polled in the last 3 months, 8 rate a Buy on JUNO stock while 4 maintain a Hold. However, the 12-month average price target stands at $59.78, marking a 12% downside from where the stock is currently trading.