Celgene Corporation (NASDAQ:CELG) announced yesterday that it will spend roughly $1 billion to venture into a partnership with Juno Therapeutics Inc (NASDAQ:JUNO).
The two firms will engage in a ten-year partnership that is expected to keep the biotech bull market going. Celgene maintains that the deal is in the best interest of the company, regardless of the increasing claims that the company is trying to lock up Juno’s technology during its development phase. A large percentage of the $1 billion will be used to purchase roughly 9.1 million Juno shares at $93 per share. The share price is almost double Juno’s closing price on Monday.
Juno is a promising biotech firm based in Seattle. The company went public in December 2014. Its IPO was ranked as one of the largest in the biotech division. Juno was described as one of the most promising biotech companies because of its involvement in the genetically engineered immune cells. The cells can identify and attack tumors, thus promising a bright future for cancer treatment.
Celgene is one of the major players in the biotechnology industry. The partnership will offer strategic benefits to Juno. It will boost Juno’s competitive advantage against its competitors such as Novartis AG (ADR) (NYSE:NVS).The latter is also developing similar tumor treatments. Analysts view the partnership as a better option compared to an acquisition. This is because Celgene would have spent too much time in the transaction processes, thus being distracted from operations. The Juno IPO was significant in reviving the biotech IPO market.
Juno’s Chief Executive Hans Bishop pointed out that Celgene Corporation (NASDAQ:CELG) is the perfect partner for Juno to achieve the full capacity of its science and clinical research. He stated that maintaining corporate independence is vital for the firm to achieve true innovation.However, not everyone thinks that the current strategy will be a smooth sail. Geoffrey Porges from Sanford C. Bernstein & Company feels that the strategy is risky, considering the past drug development failures. Despite his fears, he commended the Celgene’s management on their audacious feat.
