Cephalon, Inc. (CEPH) completed its previously announced acquisition of all the outstanding ordinary shares of Australian biotechnology company, Arana Therapeutics Limited. Arana is now a wholly-owned subsidiary of Cephalon. With this acquisition, Cephalon should be able to establish a presence in the biologics space.

Arana is focused on the development of next generation antibody-based drugs for inflammatory diseases and cancer. The company has a protein engineering technology platform that helps transform proteins, including antibodies, into drug candidates.

ART621, the lead compound at Arana, is a new generation tumor necrosis factor (TNF) alpha blocker in development for patients with inflammatory diseases. While ART621 is currently in a phase IIa study for rheumatoid arthritis, the company completed a phase IIa study with the candidate for the treatment of stable plaque psoriasis.

Besides this, Arana has a strong patent portfolio related to anti-TNF alpha antibodies and receives royalties from Abbott Laboratories (ABT) and Johnson & Johnson (JNJ). This deal should help Cephalon strengthen its inflammatory disease and oncology pipelines. 

We are pleased to see that Cephalon is looking to expand into new therapeutic areas to drive long-term growth. The company has been very active on the in-licensing/acquisition front over the past few quarters.

Earlier this year, Cephalon exercised its option to license worldwide rights to Lupuzor from ImmuPharma. Lupuzor is being studied for the treatment of Systemic Lupus Erythematosus (SLE), an autoimmune disease that causes various effects throughout different parts of the body.

Cephalon also exercised its option to acquire Ception Therapeutics whose lead pipeline candidate is reslizumab, a humanized monoclonal antibody (mAb) against interleukin-5 (IL-5), that is currently in a phase IIb/III clinical trial for the treatment of pediatric eosinophilic esophagitis (EE) and a phase II clinical trial for the treatment of eosinophilic asthma in adults. We believe Cephalon will continue to seek promising opportunities which should contribute to growth in the long-term.

In the meantime, we expect investor focus to remain on the company’s emerging oncology pipeline, Amrix, and the conversion of patients to Nuvigil. We have a Neutral rating on Cephalon with a $59 price target.
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