NEW YORK (AP) -- Biotechnology company Celgene said Wednesday it is expanding its array of cancer treatments with a deal to buy Abraxis BioScience Inc. for $2.9 billion in cash and stock.
Celgene Corp. said the transaction could add $1 billion to its annual sales by 2015.
The maker of Revlimid and Vidaza said under terms of the deal, shareholders of Abraxis will receive $58 and 0.2617 shares of Celgene for each Abraxis share they own. That values Abraxis at $71.93 per share based on Celgene's latest closing price. That is a 17 percent premium above Abraxis' closing price of $61.31 on Tuesday.
In morning trading Wednesday, Abraxis shares climbed $12.04, or 19.6 percent, to $73.35 after rising as high as $73.80 earlier in the session. The stock has traded between $24.52 and $63.75 over the last year. Celgene shares slipped $2.50, or 4.7 percent, to $50.74.
Cancer treatments are expensive and they are a major area of growth in the drug industry, which makes them a tempting target for buyers like Celgene.
Abraxis Bioscience Inc. makes the injectable cancer drug Abraxane. Abraxane is approved as a treatment for breast cancer and is being tested against skin, lung, and pancreatic cancer. If Abraxane is approved for those other uses, the value of the deal could rise to more than $3.55 billion.
Celgene will also pay $250 million if Abraxane is approved as a treatment for non-small cell lung cancer and $300 million if it is approved to treat pancreatic cancer. If the pancreatic cancer approval comes by April 1, 2013, Celgene will pay another $100 million. The deal also includes approval conditions and potential royalty payments.
Abraxane sales totaled $85.9 million in the first quarter, which was down slightly from last year. Celgene said it is determined to "re-energize" sales of the drug. Abraxis is also developing technology that is designed to make it drugs dissolve more easily by placing them inside tiny protein particles.
This month, Abraxis said a late-stage trial shows therapy including Abraxane significantly improved the effectiveness of lung cancer treatment. Earlier this year it presented data showed pancreatic cancer patients who took Abraxane lived longer. It is enrolling patients in a late-stage trial.
Celgene said it plans to file for approval of Abraxane in lung cancer early next year.
Celgene's top seller is Revlimid, which is approved to treat the blood cancer multiple myeloma, non-Hodgkin's lymphoma, and chronic lymphocytic leukemia. The company reported $530 million in Revlimid sales in the first quarter, along with $120 million in sales of Vidaza, which is used against acute myeloid leukemia and the bone marrow disease myelodysplastic syndrome, and $104 million from the multiple myeloma drug Thalomid.
Abraxis is based in Los Angeles and has about 900 employees.
Celgene Corp., of Summit, N.J., said the deal should close in the fourth quarter. The boards of both companies have approved the sale, but the agreement requires approval by shareholders of Abraxis Bioscience and regulatory approval.
Celgene said the purchase will reduce its 2010 profit by as much as 10 cents per share. Excluding the costs of the deal, it backed its adjusted forecast of $2.60 to $2.65 per share. Celgene expects the deal to add to profit in 2011.