Bluebird Up On Buyout Speculation After Celgene/Juno Deal

Buyout speculations related to Bluebird Bio, Inc. (NASDAQ:BLUE) are doing the rounds again. The rumors surfaced after biotech giant Celgene Corporation (NASDAQ:CELG) announced a $9 billion deal to buy Juno Therapeutics, Inc. (NASDAQ:JUNO) to add the latter’s CAR-T cancer therapy to its pipeline.

In fact, Bluebird’s shares were up 10.6% on Jan 22 after Celgene announced the deal to buy Juno.

We remind investors that last year, Gilead Sciences, Inc. (NASDAQ:GILD) acquired another CAR-T therapy designer, Kite Pharma for $11.8 billion. Back then, Juno and Bluebird Bio were rumored to be hot takeover targets.

CAR-T therapy is the most recent and advanced form of treating cancer. It strengthens the body’s immune system to get rid of the tumors. There are only two approved CAR-T therapies to date – Novartis’ Kymriah in acute lymphoblastic leukemia and Gilead’s Yescarta for non-Hodgkin lymphoma (“NHL”) – leaving sufficient scope for other companies to bring in prospective therapies.

Terms of the Celgene/Juno Pharma Deal

Per the agreement, Celgene will pay $87.00 per share in cash. The total transaction value is approximately $9 billion. The price represents a 28% premium over the closing share price of Juno as of Jan 19, 2018.

The transaction was approved by shareholders of both companies and is expected to close in the first quarter of 2018.

While shares of Juno have shot up 27%, that of Celgene have gone up 0.3% after the announcement. In fact, in the past six months, Juno’s stock has returned 186.2% against a 5% decline registered by the industry.

Why Juno Therapeutics?

Juno’s CAR-T therapy, JCAR017 (lisocabtagene maraleucel) for treating relapsed and/or refractory diffuse large B-cell lymphoma (“DLBCL”), the most common form of NHL, will boost Celgene’s lymphoma pipeline. A regulatory approval is being anticipated for JCAR017 in 2019 and potential peak sales are expected to be approximately $3 billion.

Data from the phase I study, TRANSCEND, announced last month, demonstrated that at dose level 2, 74% of the patients with the aforementioned indication showed an overall response rate (ORR) and 68% complete response (“CR”) rate at three months in core group.

The acquisition will also add another CAR-T candidate, JCARH125, to Celgene’s pipeline, which is being developed for multiple myeloma.

Bluebird Bio in Focus

CAR-T therapy represents immense potential at this juncture, thereby attracting the attention of big pharmas. Thus, following the acquisition of Kite Pharma and Juno, investors are anticipating a buyout offer for Bluebird, which has already started rallying on rumors.

Bluebird is developing its anti B-cell maturation antigen CAR T-cell therapy, bb2121, in a dose-ranging phase I study. Five months of follow-up data announced in December 2017 demonstrated that among the 18 patients treated with bb2121 in active dose arm, 94% achieved an objective response (OR) while 56% patients achieved a complete response. The encouraging data and the deepening response showed by bb2121 in the study bode well for the candidate. Shares of the company are up 95.5% in the past six months.

The candidate is being developed in collaboration with Celgene. However, with acquisition of Juno, Celgene is less likely to bid for Bluebird. But there are several other big pharma companies with a large cash pile who may be interested in Bluebird.

The Celgene/Juno deal has also led to a rally in stocks of other CAR-T therapy focused companies, including Fate Therapeutics, ZIOPHARM Oncology and Bellicum Pharmaceuticals.

Bluebird carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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