Is Celgene Risking Too Much For Too Little By Partnering With Juno Therapeutics?

Celgene Corporation CELG and Juno Therapeutics Inc JUNO announced a 10-year collaborative partnership on Tuesday for developing and commercializing T-cell immunotherapy. As part of this partnership, Celgene has provided $150 million to Juno in cash and has also bought stake worth in the company at $93 per share.

Tony Butler, Guggenheim Partners managing director, was on CNBC recently to discuss the type of risks faced by Celegene in this deal.

The Risks

Butler was asked about the kind of risks involved for Celgene in this partnership. He replied, "There are numerous risks. First of all it's a technology collaboration, in fact it involves many potential products down the future or out in the future and really the key on the risk side is that maybe those products don't work or maybe in fact they work, but they work well enough in order to recoup that overall investment."

"And remember Celgene put forth $150 million in cash and then bought some stock. I mean, they do have an asset in stock and they can liquidate that at certain points in time in the future and they can also increase the overall stake to 30 percent."

Personalized Therapy Is The Challenge

On whether there was an overreaction to the upside in Juno Therapeutics shares when this partnership was announced, Butler said, "No, not necessarily. I mean, listen I am a firm believer in the technology, but here's the key - It's a personalized therapy."
"So, what you have to do is you have to actually treat individual patients and because you treat individual patients this requires a very broad manufacturing platform. What I'd like to see is I'd like to see numerous patients treated from that manufacturing platform, not at the sites in which this was developed," Butler concluded.