When Celgene (NASDAQ: CELG) buys Abraxis BioScience (NASDAQ: ABII) for up to $3.55 billion, it will move into a vein of cancer therapy that it's never mined before. On its own, Celgene markets some key drugs for blood cancers, including the blockbuster multiple myeloma treatment Revlimid, whose sales could top $3 billion by 2013, at least according to analysts. But it has no drugs--marketed or experimental--that target solid tumors.
Enter Abraxis, which markets the breast cancer drug Abraxane. It nabbed $314.5 million in sales last year, and it's poised to grow: The drug recently aced a trial as a first-line therapy for non-small cell lung cancer, and Abraxis has been studying it as a therapy for pancreatic cancer and melanoma. Abraxis also boasts a new chemotherapy technology based on albumin nanoparticles. It's designed to dig more deeply into tumor cells so the drug can do a better job of fighting the cancer.
Here are the specifics of the deal: Each share of Abraxis BioScience common stock will be converted into the right to receive an upfront payment of $58.00 in cash and 0.2617 shares of Celgene common stock. That's the up-front payment of $2.9 billion. They'll also get one contingent value right per share, entitling them to future milestone payments and commercial royalties. Those payments are pegged to new FDA approvals for Abraxane, with $250 million for a NSCLC indication and up to $400 million for a pancreatic cancer use.