November 19, 2007 / 12:57 AM / 12 years ago

UPDATE 2-Celgene to buy Pharmion for $2.9 billion

(Adds CEO quote, details, background of companies, stock info, byline)

By Michael Flaherty

NEW YORK, Nov 18 (Reuters) - Biotechnology company Celgene Corp (CELG.O) will buy Pharmion Corp PHRM.O for about $2.9 billion in stock and cash, the companies said on Sunday, in a deal that boosts Celgene’s push into the oncology field.

Celgene will acquire Pharmion’s shares for $72 each, payable in cash and Celgene stock. Pharmion shareholders will receive about one-third cash and the rest in Celgene stock, at a ratio to be determined just before the deal’s completion — expected some time in the second quarter.

Celgene said the purchase would weigh slightly on 2008 earnings before adding to them in 2009 and beyond.

At $72 per share, the offer is a 46 percent premium to Pharmion’s stock on Friday, which closed 5 percent higher at $49.28.

Among the drugs the deal brings together are Revlimid, Thalomid and Vidaza.

“The combination of our two product portfolios and organizations represents the opportunity to create a leading global hematology/oncology company,” Pharmion CEO Patrick Mahaffy said in a statement.

Pharmion shareholders will own about 6 percent of Celgene shares when the deal closes, the companies said.

Shares of Celgene, based in Summit, New Jersey, closed at $64.90 on Friday.

The boards of both companies approved the deal, which still needs shareholder and regulatory approval.

In October, Celgene said third-quarter earnings rose, but sales of its most important cancer drug, Revlimid, were not as strong as expected, sending the company’s stock down nearly 9 percent. Revenue rose 43 percent to $350 million.

Shares of Celgene, the fourth-biggest biotechnology company by market capitalization, had risen roughly 60 percent in the past 12 months before the late-October earnings announcement.

Revlimid, a successor to the company’s multiple myeloma drug Thalomid, is approved to treat multiple myeloma in combination with the steroid dexamethasone.

In August, Boulder, Colorado-based Pharmion said a late-stage trial of its drug Vidaza significantly extended the life of patients with myelodysplastic syndromes, a group of blood disorders that can lead to leukemia. Its shares rose as much as 62 percent on the day in response.

Vidaza was approved in the United States in 2004 for the treatment of all five subtypes of the disease.

In the Celgene deal, each Pharmion share will be exchanged for $25 in cash and shares of Celgene in an amount determined by an exchange ratio.

If the volume weighted average price for Celgene shares for a certain period of days just before the closing is between $56.15 and $72.93, then the exchange ratio will be $47 divided by the average closing price, the companies said in a joint statement.

If the average Celgene closing price is less than $56.15, Pharmion stockholders will get 0.8370 Celgene shares, and if its more than $72.93, they’ll get 0.6445 Celgene shares. (Additional reporting by Toni Clarke; Editing by Braden Reddall)

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