Celgene (CELG) Makes Big Push Into Solid Tumor Space With $2.9 Billion Acquisition of Abraxis (ABII)

June 30, 2010 10:31 AM EDT
Biotechnology company Celgene Corp. (NASDAQ: CELG) said Wednesday that it has agreed to buy Abraxis BioScience Inc. (NASDAQ: ABII) for $2.9 billion in cash and stock in an effort to expand its treatments for cancer.

Celgene, the maker of Revlimid and Vidaza, said that the deal that has been approved byt the boards of both companies could add $1 billion to its annual sales by 2015.

Under the terms of the deal, shareholders of Abraxis will receive $58 in cash and 0.2617 shares of Celgene for each share owned. The acquisition values shares of Abraxis at $71.93 a piece, a premium of 17 percent above it Tuesday closing price of $61.31.

"The acquisition of Abraxis BioScience is an exceptional strategic fit that will accelerate our strategy of becoming a global leader in oncology," said Bob Hugin, Chief Executive Officer of Celgene Corporation. "We are excited by the opportunity to leverage our clinical, regulatory and commercial capabilities to provide metastatic breast cancer patients with an innovative treatment in Abraxane."

Celgene added that it has also agreed to pay Abraxis $250 million if it receives approval for its non-small lung cancer treatment and an addition $300 million if it is approved to treat pancreatic cancer. If approval for the pancreatic cancer treatment comes before April 1, 2013, Celgene has agreed to pay an additional $100 million.

“In Celgene we have found the ideal partner to further expand the reach of Abraxane and our other treatments, in order to improve the lives of patients worldwide,” said Patrick Soon-Shiong, M.D., Executive Chairman of Abraxis BioScience.

Celgene said that the purchase will reduce its 2010 profit slightly, as it forecasts earnings for the year in the range of $2.60 to $2.65 per share, excluding one-time items.

Wedbush analyst Michael King, Jr. views the deal as "reasonably good" from a business standpoint for Celgene. King said, "although it may lack some of the sex appeal of other potential acquisitions, ABII's only product, Abraxane, should produce nearly $400mm in revenue in 2010."

Shares of Abraxis are up 19.12 percent to $73.03 in early market movement Wednesday, which Celgene shares are down 5 percent $50.59.

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