Celgene to buy Abraxis for $2.9 billion

Celgene announced that it entered into an agreement to buy Abraxis BioScience in a cash and stock deal valued at $2.9 billion. Celgene CEO Bob Hugin noted that the acquisition, which includes Abraxis' breast cancer treatment Abraxane (protein-bound paclitaxel), "is an exceptional strategic fit that will accelerate our strategy of becoming a global leader in oncology."

Celgene will pay $58 and issue 0.2617 common stock shares for each share of Abraxis, representing a 17 percent premium over the latter's closing share price on June 29. In addition, Abraxis shareholders will receive rights to milestone payments totalling $650 million if Abraxane garners regulatory approval for non-small-cell lung cancer and pancreatic cancer by a pre-determined deadline. Abraxis shareholders are also eligible to receive royalties on sales of the drug, Celgene noted.

Abraxane is approved in both the US and Europe for the treatment of breast cancer, and recorded a 25-percent increase in first-quarter sales to $87.9 million. Abraxis recently reported positive results from a late-stage study in patients with non-small-cell lung cancer.

Celgene noted that the deal, which has been approved by both companies' boards of directors, but is still subject to Abraxis shareholder review, is expected to close in the fourth quarter of the year. Celgene expects the acquisition to boost its revenue by $1 billion annually by 2015, and add to profit starting in 2012.

Commenting on the deal, Cowen & Co. analyst Eric Schmidt said "Abraxane appears to be a good strategic fit for Celgene’s oncology franchise and appears poised for growth via label expansions, and broader geographic promotion," but warned that "on the negative side, Celgene is paying a substantial premium" under the deal. However, Summer Street Research analyst Carol Werther noted "the fit is good and Celgene has a lot of cash," adding that "I would expect them to continue to look for other products and companies that fit well with them."

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