U.S. biotechnology company Celgene Corp has agreed to acquire Abraxis BioScience Inc , which makes an innovative chemotherapy treatment, for $2.9 billion in cash and stock.
The deal gives Celgene, which makes the blood cancer drugs Thalomid and Revlimid, a new plank in its expanding oncology portfolio. And it will give the company an expected $1 billion a year in added revenue by 2015.
Abraxis's main product is Abraxane, a solvent-free drug that combines the chemotherapy agent paclitaxel with albumin, a naturally occurring human protein that wraps around the drug and allows it to be administered to patients in higher doses.
The drug generated revenue in 2009 of $314.5 million.
It looks like they're paying a lot, but the fit is good and Celgene has a lot of cash, Summer Street Research analyst Carol Werther said. I would expect them to continue to look for other products and companies that fit well with them.
Celgene will pay $58 in cash and 0.2617 of Celgene stock for each Abraxis share, implying a price of $71.93 a share based on Tuesday's closing share prices -- or a premium of 17 percent to Abraxis's closing price on Tuesday of $61.31.
In addition, shareholders will receive up to $650 million in milestone payments and royalties should the company meet certain development goals. According to Werther, the payments are worth an additional $6 a share to Abraxis shareholders.
Abraxis shares rose 19.6 percent to $73.33 in premarket electronic trading on Nasdaq on Wednesday. Celgene's shares fell 4.8 percent to $50.75.
Abraxane is approved for use in metastatic breast cancer. The company has also been testing it as a treatment for lung cancer.
Data from a late-stage lung cancer study released earlier this year showed promising results. Those results have helped lift Abraxis's shares more than 50 percent this year.
The transaction hands more than $2 billion to Patrick Soon-Shiong, Abraxis's founder and executive chairman, who held some 33 million shares, or more than 80 percent of the company, as of last October, according to a filing with the Securities and Exchange Commission.
The acquisition is expected to close in the fourth quarter, and is expected to modestly hurt Celgene's 2010 adjusted earnings, the company said. It reiterated its earnings outlook for 2010.
Morgan Stanley & Co is acting as financial adviser to Celgene. Lazard Freres & Co, Goldman Sachs & Co, and BofA Merrill Lunch are acting as co-financial advisers to Abraxis.
(Reporting by Toni Clarke, Anand Basu and Lewis Krauskopf, editing by Dave Zimmerman)