Analysts Diverge On Celgene's Deal With Juno Therapeutics

Whether Celgene Corporation (NASDAQ: CELG) went too far in its $1 billion development deal with Juno Therapeutics Inc (NASDAQ: JUNO) is a matter for speculation.

Celgene unveiled an agreement late Monday in which it will pay Juno $150 million and acquire about $850 million in Juno shares in exchange for development rights to part of Juno's pipeline.

See Also: Juno Therapeutics Signs $1 Billion Development Pact With Celgene

"It's a hefty premium for assets that are difficult to value," said Morgan Stanley's Matthew Harrison, who didn't offer a rating on Celgene.

But JMP's Michael G. King Jr said the deal will help Celgene maintain leadership in both current and future cancer drugs. King maintained an Outperform rating and $114 on Celgene.

Juno, which went public in December at $38 a share, changed hands recently at $54.80, up more than 18 percent.

Celgene, however, traded at $114.66, off $0.25.

Sanford Bernstein's Geoffrey C. Porges said Celgene's move is likely to ignite "significant debate."

Celgene maintains nearly two dozen mostly smaller development partnerships, but last year agreed to pay $710 million to privately held Nogra Pharma Ltd. to license a drug for Crohn's disease.

"We expect investors to begin to lose patience with Celgene's complex and costly dealmaking," Porges said.

Porges said the "front-loaded" terms of the Juno deal "defy good judgement," but nonetheless maintained an Outperform rating on Celgene and $154 target.

As part of the transaction, Celgene agreed to acquire the $850 million stake in Juno at $93 a share, and can boost its holdings in Juno to up to 30 percent over the 10-year agreement. Celgene will also name a director to Juno's board.

BMO's Jim Birchenough regards the deal as "transformational" for Celgene and maintained an Outperform rating and $163 target.

The transaction adds Juno's CAR-T and TCR technology to Celgene's wider immuno-oncology drug platform, which Birchenough believes is "underestimated."