What You Ought To Know About Celgene's Deal-Making Magic

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Celgene , the biotech giant best known for its $4 billion a year myeloma drug Revlimid, has been among the most active in making deals with young biotech companies.  In January, Celgene made its latest deal, handing over $50 million to cozy up to San-Diego based Abide.

The Abide deal continues Celgene's land grab for enzyme targeting therapies. But Celgene isn't the only one excited about enzyme and epigenetics research. Investors are increasingly intrigued by their potential, and that has Celgene sitting on handsome gains.

CELG Chart

CELG data by YCharts

Boosting its CNS pipeline
Celgene isn't the first to ink an agreement with Abide. Last May, Merck agreed to an arrangement that could be worth as much as $430 million to Abide if Abide's technology for targeting the serine hydrolases family of enzymes succeeds. That serine hydrolases family of enzymes is already the target of Merck's blockbuster DPP-4 diabetes drug Januvia.

While Merck is working with Abide on metabolics, Celgene has linked up with them on inflammation and immunology targets. Celgene is particularly interested in this area given its extensive investment in apremilast, a promising arthritis compound that may win FDA approval this year.

The most advanced compound in Abide's pipeline covered by Celgene's partnership is AB101131, a pre-clinical compound that the companies hope will enter human trials next year. In addition to taking a small equity stake, Celgene also retained an option to eventually buy Abide.

Irons in the fire
The Abide partnership builds on a string of deals Celgene has made over the past couple years, including a December investment in cancer focused stem cell researcher OncoMed Pharmaceuticals .

Celgene agreed to pay OncoMed up to $3.15 billion in milestone payments if OncoMed can successfully bring compounds like demcizumab to market. Demcizumab is in phase 2 trials as a treatment for ovarian cancer, and is being studied in pancreatic, colorectal, and non-small cell lung cancer too.

Celgene paid Agios  $130 million in 2010 to partner on therapies that starve cancer of specific enzymes. Celgene handed over another $20 million in December to extend its arrangement with the epigentics cancer play for another year.

In addition to those deals, Celgene has teamed up with Epizymeto develop an epigenetics treatment for mixed lineage leukemia, Blubird bio, and the privately held Acetylon. Blubird is working on gene-altering cancer therapies that reprogram T-cells to destroy cancer cells, while Acetylon is developing a myeloma compound.

Celgene is also working with Acceleron on sotatercept, an anemia treating compound for rare diseases that the two companies have been developing since 2008. In 2011, Celgene expanded its relationship with Acceleron to include another anemia drug, ACE-536.

Profiting in more ways than one
The following chart shows that shares in some of Celgene's partners have made a significant move since last fall. The gains make these partnerships even more intriguing given Celgene owns equity stakes in each of them.

OMED Chart

OMED data by YCharts

Celgene's $22 million investment in OncoMed shares at $15.13 per share has doubled.  Celgene also owns 12.5% of Epizyme , or 3.3 million shares. That position is paying off handsomely since December thanks to positive pipeline news lifting shares from $20 to $30.

Celgene also owns 666,667 shares of Acceleron at roughly $15 per share. With shares trading near $50, that investment has more than tripled. And Agios sold 708,333 shares to Celgene for $12.75 million or $18 per share last July, which means Celgene is up 67% on that position.

Fool-worthy final thoughts
All of these companies are working on pre-clinical or early to mid stage products, and none have any revenue outside of collaboration agreements.  That means they're all highly speculative.

As a result, Celgene's recent hot streak could as easily sour as soar. But for now Celgene's investment team is riding high and that's likely to keep Celgene making more deals this year.

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The article What You Ought To Know About Celgene's Deal-Making Magic originally appeared on Fool.com.

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. Todd owns Gundalow Advisor's, LLC. Gundalow's clients do not have positions in the companies mentioned.The Motley Fool recommends Celgene. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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