Celgene cancer drug acquisition may bode well for life science M&A

Celgene (NYSE:CELG) has acquired cancer drug developer Avila Therapeutics in a deal valued up to […]

Celgene (NYSE:CELG) has acquired cancer drug developer Avila Therapeutics in a deal valued up to $925 million if milestones are reached.

Avila’s therapeutic platform involves the development of covalent drugs, which  latch onto or bond with target cells and effectively neutralize those cells.

Avila’s lead therapeutic, AVL-292, is a lymphoma and autoimmune drug in phase 1 clinical trials.

Celgene, in Summit, New Jersey, will pay Avila $350 million cash under the terms of the deal with an additional $195 million if certain milestones are met. There is also the potential for $380 million if Avila’s platform meets additional milestones.

In a conference call with analysts discussing its fourth-quarter earnings, Celgene CEO Robert Hugin said the acquisition would improve its drug-discovery pipeline:

“[It] deepens our hematology and drug-discovery pipelines, and creates research and development synergies with existing Celgene programs.”

Bruce Booth, a partner in Atlas Ventures which invested in Avila, wrote in a Forbes article that the deal calls attention to the strong contributions being made by biotechnology startups.

Like many of the big exits in 2011, Avila is yet another example that taking early stage risk around real innovation pays.

He also called attention to the fork in the road that faces life science startups as they strive to reach an exit:

Last year, as our lead AVL-292 program was advancing in the clinic, Avila actively pursued a number of strategic alternatives and wrestled with a number of questions: Do we seek a regional or global partner on AVL-292? Do we do a series C or do we file for an IPO?  Should we do more discovery alliances?  Should we focus on licensing or M&A?

Avila was helped by lucrative deals with Sanofi-Aventis in 2010, along with Novartis, Clovis Oncology and the Leukemia and Lymphoma Society.

Celgene’s acquisition could be part of a wave of life science M&A deals, including Amgen’s $1.16 billion acquisition of Micromet and Roche’s hostile bid for Illumina.

Addressing a question on its acquisition of Avila, Celgene Chief Financial Officer Jacqualyn Fouse said it saw scope for acquisitions of smaller companies that can boost the company’s capabilities:

“…We always want to be out there looking for potentially transformative technologies or assets. As Bob said, best-in-class top assets are what we would like to have that can be complementary to our internal capabilities and fit well within the portfolio, and it could very well be that those will be of a fairly modest size. …”

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