Celgene to buy drugmaker Receptos for $7.2 bn

Celgene Corp has announced a $7.2-billion agreement to acquire drug maker Receptos Inc.

Celgene's all-cash offer for the startup, announced yesterday, takes its growth strategy beyond partnership deals with other biotechnology companies, many of which focused on early-stage experimental therapies.

The Summit, New Jersey-based Celgene signed more licensing deals last year than any other biotech drugmaker -- 10 in all, according to data compiled by Bloomberg Intelligence.

The purchase of Receptos could potentially help Celgene diversify quickly away from its blockbuster drug Revlimid, a treatment for multiple myeloma, enabling it add a new drug to its pipeline.

''The pace of dealmaking has been torrid,'' Michael Yee, an analyst at RBC Capital Markets, told Bloomberg. The company is ''more aggressive than its peers, they take more risks than some others, but that's been paying off.''

The strategy had been championed by chief executive officer Bob Hugin, a former US Marine who headed global debt issues at JP Morgan & Co, which he left in 1999.

The acquisition of Receptos significantly enhances Celgene's inflammation and immunology (I&I) portfolio, further diversifies the company's revenue beginning in 2019 and beyond, and builds upon Celgene's growing expertise in inflammatory bowel disease (IBD).

The transaction adds Ozanimod, a novel, potential best-in-class, oral, once-daily, selective sphingosine 1-phosphate 1 and 5 receptor modulator (S1P) to Celgene's deep and diverse pipeline of potential disease-altering medicines and investigational compounds.

Based on clinical studies, Ozanimod demonstrated several areas of potential advantage over existing oral therapies for the treatment of ulcerative colitis (UC) and relapsing multiple sclerosis (RMS), including its cardiac, hepatotoxicity and lymphocyte recovery profile. The phase III TRUE NORTH trial in UC is currently underway with data expected in 2018.

The phase III RADIANCE and SUNBEAM RMS trials are ongoing and data is expected in the first half of 2017 to support a RMS approval in 2018.

Additionally, Ozanimod is positioned to potentially become the first S1P receptor modulator to be approved for IBD.

"The Receptos acquisition provides a transformational opportunity for Celgene to impact multiple therapeutic areas," said Bob Hugin, chairman and chief executive officer of Celgene. "This acquisition enhances our I&I portfolio and allows us to leverage the investments made in our global organization to accelerate our growth in the medium and long-term."

Celgene has a strong scientific foundation in inflammation and immunology that covers a broad spectrum of diseases. Anchored by the successful global launch of OTEZLA (apremilast) in psoriasis and psoriatic arthritis, and new opportunities for expansion as a result of the addition of the Receptos programs, Celgene's I&I pipeline will, upon completion of the transaction, consist of three high-potential commercialized or late-stage assets; OTEZLA, GED-0301 and Ozanimod.

All three candidates are in phase III development and encompass four indications - Behçet's disease, Crohn's disease (CD), UC and RMS. The pipeline also includes seven molecules in phase II development in a variety of indications, including RPC4046 for eosinophilic esophagitis (EoE), and a growing number of phase I and preclinical assets.

"In Celgene, we have found the ideal partner to maximise the potential of Ozanimod and our promising pipeline in order to improve the lives of patients worldwide," said Faheem Hasnain, president and chief executive officer of Receptos.

"Ozanimod is a potentially transformational oral therapy that has demonstrated robust clinical activity with impressive immune-inflammatory modulating properties in phase II trials," said Scott Smith, president, I&I for Celgene.

"Ozanimod is a highly differentiated next-generation S1P receptor modulator with important efficacy and safety features that create the opportunity for development across a spectrum of immune-inflammatory diseases."

Celgene will acquire all of the outstanding shares of common stock of Receptos through a tender offer, followed by a second-step merger. In the tender offer, Celgene, through a wholly-owned subsidiary, will offer to purchase all of the outstanding shares of common stock of Receptos for $232.00 per share in cash, or an aggregate of approximately $7.2 billion, net of cash acquired.

The transaction has been approved by the boards of directors of both companies and is subject to customary closing conditions, including the tender of at least a majority of outstanding shares of Receptos common stock and expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The transaction is anticipated to close in 2015.

Celgene will acquire all remaining shares of Receptos common stock that are not tendered in the tender offer through a second-step merger, which will be completed shortly following the tender offer. Celgene expects to fund the transaction through a combination of existing cash and new debt.

The resulting capital structure is consistent with Celgene's financial strategy and investment grade profile. This acquisition maintains flexibility for additional value creating transactions and share buyback.

J P Morgan and Citi are acting as financial advisors to Celgene on the transaction. Centerview Partners LLC is acting as financial advisor to Receptos. Legal counsel for Celgene is Proskauer Rose LLP, and Receptos' legal counsel is Latham & Watkins LLP.