Jazz Pharmaceuticals Nears Deal to Buy Celator for About $1.5 Billion

Jazz Pharmaceuticals PLC is nearing a deal to buy Celator Pharmaceuticals Inc. for about $1.5 billion, a huge premium for a company with a promising leukemia drug but no revenue.

The deal could be announced as soon as Tuesday, according to people familiar with the matter.

Jazz would be shelling out about double Celator's market value of about $740 million—a lofty premium even in biotechnology, where acquirers often pay up for promising new treatments. Less than three months ago, Celator announced positive results for a clinical trial of a leukemia drug. The therapy, Vyxeos, aims to treat a blood cancer known as acute myeloid leukemia with two currently available drugs in a new formulation.

In mid-March, Celator, of Ewing, N.J., released data indicating the drug candidate prolonged the lives of patients. The news raised investors' confidence that the compound would be approved, and Celator's share price rose more than 400% in a single day.

Celator subsequently sold new shares to raise money that it could use to bring Vyxeos to market, if it is approved. But some analysts still questioned whether the company, which doesn't have any revenue, would have enough money to do that.

Jazz has a market value of about $9 billion and had nearly $1 billon in cash as of March 31. Formerly headquartered in California, Jazz gained a foreign tax address, due to its 2012 acquisition of an Irish drug company—a so-called "tax inversion" that moved its legal home to Ireland.

Such deals have been popular among drug companies, and many that struck them around that time have since become voracious acquirers in the U.S. However, Jazz largely sat out the wave of consolidation in specialty pharmaceuticals during the past two years. Its last major purchase was a 2014 deal for Gentium SpA, an Italian maker of drugs to treat rare diseases. Jazz spent about $1 billion to acquire Gentium.

But Wall Street has questioned what the company will do when its main product, narcolepsy drug Xyrem, loses patent protection. Executives have indicated they are interested in bulking up the company's portfolio of cancer treatments, such as the one Celator is developing.

Jazz already sells two drugs for cancer patients. One is Erwinaze, a treatment for a blood cancer known as acute lymphoblastic leukemia. Jazz recently began selling a new drug in the U.S., Defitelio, which treats a rare but fatal complication of stem cell transplants given to certain cancer patients.

Jazz shares are down about 15% during the past year, though they have recovered somewhat from the broad selloff in pharmaceutical stocks last summer. The company posted $1.3 billion in revenue last year, a 13% increase over 2014.

There's been a steady stream of deal making in biotech even as merger activity among big drugmakers has slowed somewhat this year. Two weeks ago, Pfizer Inc. struck a $4.5 billion deal to buy Anacor Pharmaceuticals Inc., which is seeking approval from the Food and Drug Administration for an eczema treatment.

(END) Dow Jones Newswires

May 30, 2016 22:35 ET (02:35 GMT)

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