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Celgene’s Receptos Deal Almost Came Billions Cheaper in 2013

When Celgene Corp. agreed to buy Receptos Inc. for $7.2 billion this month, both companies soared on the news. Little did investors know that Celgene had a Receptos deal in its grasp in 2013, when the drugmaker was trading for an eighth of the final price.

The earlier negotiations, revealed this week in a filing, are a reminder of the spiraling values of biotech companies over the past few years, spurred by an unprecedented era of dealmaking as companies compete to have the best collection of experimental drugs.

Acquisition prices this year for pharmaceutical and biotechnology companies are the highest relative to Ebitda and revenue in at least 20 years, according to data compiled by Bloomberg and based on median multiples for deals. Ebitda stands for earnings before interest, taxes, depreciation and amortization.

The median Ebitda multiple has jumped 58 percent this year, the biggest annual increase since 1998, the data show. Celgene’s offer price of $232 a share for Receptos was the most expensive for a drugmaker this year, at 1,490 times revenue for the previous 12 months, according to data compiled by Bloomberg.

Celgene has been chasing Receptos since 2013, according to the July 28 filing. In back-and-forth negotiations that also involved at least two other public companies, Celgene and Receptos swapped drafts of a merger agreement in late 2013.

Coming Back

Celgene backed away from that deal in October 2013, when Receptos was trading for $29.97 a share, and only came back to the table 13 months later. By that point Receptos stock had more than tripled along with the broader surge in biotech shares. The share gains were also fueled by two mid-stage trials finding the company’s flagship drug ozanimod effective in multiple sclerosis and ulcerative colitis patients.

The bidding became competitive in February this year, with both Celgene and another, unidentified public company making offers with premiums of more than 40 percent above Receptos’s trading price, according to the filing. By the end of June, Celgene had won out after increasing its offer several times.

Brian Gill, a Celgene spokesman, didn’t immediately respond to an e-mail and phone call seeking comment. On a conference call the day the deal was announced, Celgene Chief Executive Officer Bob Hugin said that he was fine with the deliberate pace his company took.

«We spent a lot of time making sure that we know the asset and know the company," Hugin said. «We think the price we paid is very fair value.»


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