Celgene will take a 5.9% stake in BeiGene in an up-to-$1.393 billion cancer immunotherapy deal that will catapult the U.S.-based biotech giant to a top position in programmed death protein-1 (PD-1) checkpoint inhibitors, the companies said today.

Celgene agreed to acquire rights outside Asia—including the U.S. and Europe—and in Japan to BeiGene’s PD-1 inhibitor BGB-A317, which is on track to start pivotal studies in solid-tumor cancers next year. BeiGene will retain exclusive rights to develop and commercialize BGB-A317 for solid tumors in the rest of Asia, and for blood cancers worldwide, and in combinations with its other portfolio compounds.

The companies asserted that their strategic collaboration will maximize their potential for creating best-in-class PD-1-based immuno-oncology combinations in solid tumors by combining BGB-A317 with Celgene’s pipeline assets and global oncology expertise. BGB-A317 is being developed as a monotherapy and in combination with other therapies for the treatment of solid tumor cancers.

“The acquisition of BGB-A317 significantly accelerates and expands our opportunity to develop and deliver novel T-cell checkpoint inhibitor-based therapies in solid-tumor cancers to patients worldwide and adds to our ongoing PD-L1 FUSION™ program in hematological malignancies,” Celgene CEO Mark J. Alles said in a statement.

Celgene and BeiGene are entering a PD-1/PD-L1 (programmed death-ligand 1) segment that has already seen five treatments win U.S. approval: Merck & Co.’s Keytruda® (pembrolizumab), approved for its latest indication in May; Bristol-Myers Squibb’s Opdivo® (nivolumab); Roche’s Tecentriq® (atezolizumab)‎; Pfizer and Merck KGaA’s Bavencio® (avelumab), approved in March; and AstraZeneca’s Imfinzi® (durvalumab), which also won FDA approval in May.

According to BeiGene and Celgene, BGB-A317 has differentiated itself from currently approved PD-1 antibodies through an engineered Fc region, potentially minimizing interactions with other immune cells that may impede effector T-cell function. BGB-A317 is currently in two pivotal trials in China, with global pivotal studies set to be launched next year by the companies.

In addition, BeiGene will obtain licensing rights in China to Celgene’s CC-122, a next-generation CelMoDTM currently in development for lymphoma and hepatocellular carcinoma. BeiGene plans to expand manufacturing and commercial operations in China in preparation for the potential approvals of BGB-A317 and future therapies to be developed by BeiGene in greater China.

The boards of BeiGene and Celgene have approved the deal, which is expected to be completed during the third quarter, subject to the expiration or termination of applicable waiting periods under all applicable antitrust laws, plus customary closing conditions.

‘Transformational Event’

“This strategic partnership with Celgene is a transformational event for BeiGene, transitioning us into a commercial-stage company and preparing us well for the future potential launch of our internally developed compounds, some of which are already in pivotal trials in China,” stated John V. Oyler, BeiGene co-founder, CEO, and chairman.

BeiGene will receive $263 million in up-front licensing fees from Celgene, which has agreed to take a $150 million equity stake in BeiGene by purchasing 32.7 million of BeiGene’s ordinary shares at $4.58 per share, or $59.55 per BeiGene’s American Depositary Shares (ADS)—a 35% premium to an 11-day volume-weighted average price of BeiGene’s ADS.

Celgene also agreed to pay BeiGene $980 million tied to achieving development, regulatory, and sales milestones, plus royalties on future sales of BGB-A317.

Also under the deal, BeiGene agreed to acquire Celgene’s commercial operations in China—though Celgene said it will maintain a strategic and R&D presence in China dedicated to long-term commercial activities, regulatory affairs, and clinical development of new therapies in the country.

“China is an important market for Celgene, and our collaboration with BeiGene positions us exceptionally well to optimize research, manufacturing, and the long-term commercial potential of our portfolio in China,” Alles added.

Celgene also agreed to continue supporting BeiGene with management of Revlimid®’s risk minimization program. To avoid embryo-fetal exposure, Revlimid is only available through a restricted distribution program called Revlimid Risk Evaluation and Mitigation Strategy (REMS)®.

BeiGene will also gain an exclusive license to commercialize Celgene’s approved cancer therapies in China, including Abraxane® (paclitaxel protein-bound particles for injectable suspension)(albumin-bound), Revlimid (lenalidomide), and Vidaza® (azacitidine).

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