Analysts Provide Insight On Celgene Corporation And Receptos, Inc. In Light Of Acquisition Announcement

Oncology therapy company Celgene Corporation (NASDAQ:CELG) announced a definitive agreement on July 14 to acquire Receptos Inc (NASDAQ: RCPT). Under the terms of the agreement, Celgene will pay $7.2 billion in cash for the autoimmune drug maker. The boards of both companies have approved the terms of the acquisition and expect it to close before the end of the quarter.

Celgene is an integrated global pharmaceutical company engaged in developing drugs for hematology, oncology, and autoimmune diseases. The acquisition will allow Celgene to expand its Inflammation and Immunology portfolio and ultimately drive the company’s revenue. This deal comes at an important point as Celgene’s pipeline blockbuster cancer drug, Revlimid, is losing patent protection.

Celgene CEO Robert Hugin weighed in on the acquisition, noting, “The Receptos acquisition provides a transformational opportunity for Celgene to impact multiple therapeutic areas.” He continues, “This acquisition enhances our [Inflammation & Immunology] portfolio and allows us to leverage the investments made in our global organization to accelerate our growth in the medium and long-term.”

Receptos is developing a drug called ozanimod that is now in Phase 3 clinical trials as a treatment for multiple sclerosis and ulcerative colitis. Celgene executives see hope in ozanimod, which is Receptos’ prime asset. The autoimmune drug “is a potentially transformation oral therapy that has demonstrated robust clinical activity with impressive immune-inflammatory modulating properties,” said Scott Smith, Celgene’s president. Furthermore, Celgene’s executives said that ozanimod could have peak annual sales of $4 billion to $6 billion.

In reaction to the news, Celgene stock rose 8.3% to $133 in early morning trading on June 15 while Receptos jumped even higher by 10.5% to $228.85.

Nomura Securities analyst Ian Somaiya reiterated a Buy rating on Celgene and raised his price target to $165 on July 15, but downgraded Recpetos to Hold with a price target of $232 after the merger news. The analyst believes “Celgene got a good deal given our projections for peak ozanimod sales of $6.2bn in MS and UC alone.” He adds that this puts “the $7.2bn purchase price well below the 3-4x peak sales multiple (Figs 1 & 2) we have seen in recent pharma/biotech deals”

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Cody Miecnikowski writes about stock market news. He can be reached at cody@tipranks.com

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