Celgene to pay $1.1 billion upfront and up to $5.9 billion in milestone fees.

In a move intended to diversify its portfolio, Celgene has agreed to acquire privately held San Diego, California-based biopharmaceutical company Impact Biomedicines. The deal – with a value of up to $7 billion, would be one of the largest for Celgene if both the upfront and all milestone payments are made.

The acquisition comes as Celgene expects to soon face generic competition against its leading cancer medicine Revlimid (Lenalidomide), which is indicated for the treatment of myelodysplastic syndrome (MDS), multiple myeloma and mantle cell lymphoma (MCL). In addition, the company’s stock price fell significantly in October 2017 after its highly touted pipeline candidate for Crohn’s disease failed to meet its endpoints in a late-stage clinical trial.

Impact is focused on the development of drugs to treat the blood cancer myeloproliferative neoplasms and other cancers. Its lead candidate is fedratinib, a late-stage, small-molecule Janus kinase (JAK) inhibitor for the treatment for myelofibrosis, a blood cancer that disrupts the normal production of blood cells, and polycythemia vera, a slow-growing blood cancer. The company was formed in 2016 to acquire the full rights for the global development and commercialization of fedratinib from Sanofi. 

As part of the deal, Impact will receive $1.1 billion in upfront payments, with a possible additional $1.25 billion if regulatory approval milestones for myelofibrosis are achieved. Additional payments will be made if regulatory approvals are received in other indications, with a total potential amount for regulatory approval milestone payments of $1.4 billion. Additional milestone payments of up to $4.5 billion will be made in aggregate tiered sales-based milestone payments. 

This acquisition follows several previous acquisitions and partnerships designed by Celgene to bring new drug candidates into its pipeline. Examples include the $7.2-billion acquisition of Receptos Inc. in 2015 and its candidate ozanimod for the treatment of Crohn’s disease, ulcerative colitis and multiple sclerosis.