Analysts Diverge On Celgene Corporation's Deal With Juno Therapeutics Inc

Whether Celgene Corporation

went too far in its $1 billion development deal with Juno Therapeutics Inc

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. "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 cents. 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."