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Celgene offers up to $775M for Delinia
March 2017
by Kelsey Kaustinen  |  Email the author
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SUMMIT, N.J. & CAMBRIDGE, Mass.—Celgene is starting 2017 off with a growth spurt, having announced an agreement to acquire privately held Delinia Inc. Delinia is a biotechnology company focused on the development of novel therapeutics for autoimmune diseases. Its lead program, DEL106, is an IL-2 mutein Fc fusion protein engineered to preferentially upregulate regulatory T cells (Tregs), immune cells that play a critical role in maintaining natural self-tolerance and immune system homeostasis.
 
“Delinia is at the forefront of advancing new approaches to treating patients with severe and debilitating autoimmune diseases,” said Rupert Vessey, president of the Research and Early Development division at Celgene. “We look forward to progressing DEL106 into the clinic next year.”
 
Per the terms of the transaction, Celgene will make an initial payment to Delinia of $300 million. Delinia shareholders stand to receive up to an additional $475 million in contingent milestone payments if certain development, regulatory and commercial goals are met. Celgene and Delinia expect the deal to be completed in the first quarter of the year.
 
This deal will boost Celgene’s pipeline in inflammation and immunology (I&I), thanks to DEL106 and related second-generation programs. Tregs represent a promising target in such therapeutic areas as these immune cells play a particularly important role in the pathophysiology of both cancer and autoimmune diseases such as rheumatoid arthritis and systemic lupus erythematosus.
 
As Delinia explains on its website, “Tregs are a relatively small population of T cells, representing approximately 5 percent of CD4+ T cells in human blood. The IL-2 pathway is key to the production and function of Tregs. Treg production and function are regulated in a distinct manner from CD4+ T Effector cells and CD8+ T cells. Effector T cells are activated by IL-2, and produce their own IL-2 in a ‘feed-forward’ form of activation. Tregs do not produce their own IL-2, and are dependent on IL-2 from other immune cells. Thus, Tregs have a close interaction with and dependency on the immune cells that they regulate.”
 
Delinia adds that it has developed a “novel protein therapeutic that is a potent, highly selective agonist of the IL-2 receptor on Tregs. This molecule activates and augments the levels of a cell type that is the natural regulator of multiple arms of the immune response, in contrast with immunosuppressive drugs that can cause profound immunosuppression and both short- and long-term toxicities. Our data indicate that this molecule will be a new paradigm in the treatment of autoimmune disease.”
 
“We are delighted to enter into this transaction with Celgene,” Dr. Saurabh Saha, CEO of Delinia, commented in a press release. “Their expanding inflammation and immunology franchise and strong commitment to scientific innovation makes them an ideal company to continue to move DEL106 forward.”
 
While this may seem like a sizable price tag for a small, young company, the deal is well in line with recent work by Celgene to boost its presence in immunology. As noted by Bruce Booth in an article for Forbes, “Over the past decade, Celgene has built an impressive I&I portfolio of both internally discovered and externally sourced programs. Otezla (apremilast) is its flagship I&I medicine today (fastest psoriasis drug to hit $1B in sales from launch) and was discovered at Celgene; behind it are several additional homegrown programs earlier in development (e.g., immunomodulator CC-220 and anti-fibrotic CC-90001). Celgene’s I&I pipeline also has several high-profile externally sourced therapies, including mongersen/GED-0301 (via a license with Nogra Pharma) and ozanimod (via acquisition of Receptos). They’ve also been at the forefront of changing the autoimmune treatment paradigm, such as with the recent deal with Anokion on tolerance induction.”
 
In a recent commentary on the acquisition, Geoffrey Porges and Bradley Canino of Leerink Partners noted that Celgene expects to progress DEL106 into the clinic in 2018, adding that “Realistically, DEL106 has a 6-8 year development timeline ahead in the large inflammatory disease indications they are targeting, given expected progress into Phase 1 in 2018.”
 
Leerink Partners adjusted their outlook for Celgene in the wake of the acquisition and Celgene’s full-year 2016 results, forecasting total revenue for the company of $22.6 billion by 2020, with an expense estimate that is “largely unchanged” and “an operating (EBIT) margin of 57 percent in 2017, increasing to a peak of 59 percent by 2019 … We currently forecast 2020 pro-forma EPS of $13.99, compared to recent consensus of $12.61, and to management’s long-term guidance of >$13.00.”
 
Celgene saw net product sales for full-year 2016 of $11.18 billion, a 22-percent increase year over year, with total revenue for the year of $11.22 billion, up 21 percent year over year.
 
Code: E031702

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