Celgene Corp. is shelling out $45 million in stock and options to acquire a subsidiary - a placental stem cell recovery company called Anthrogenesis Corp.

The move will mesh with Celgene's focus on hematologic cancers, give it a new therapeutic option to offer, and make Celgene a provider of stem cell banking services through Anthrogenesis' Lifebank division.

"We've been working with Anthrogenesis for well over a year now on a number of research collaborations, including studying the ability of our small molecules to influence stem cell differentiation," John Jackson, CEO and chairman of Celgene, said in a conference call. "We've been very pleased with the progress of the collaboration."

And, Jackson said, the collaborations gave Celgene an "opportunity to gain great insight" into Cedar Knolls, N.J.-based Anthrogenesis.

Apparently, Celgene liked what it saw. Celgene expects to issue 1.45 million shares and 1.12 million options and warrants at an exchange ratio of 0.4545 per share of Anthrogenesis common stock and warrants. That suggests a fully diluted price of about $45 million, although if Anthrogenesis achieves certain objectives, that exchange ratio could climb to a maximum of 0.50.

Celgene's stock (NASDAQ:CELG) rose $1.50 Thursday to close at $23.81, on a day when the Nasdaq biotechnology index climbed about 4.2 percent.

Anthrogenesis focuses on human stem cell therapeutics and regenerative medicine. Anthrogenesis has technology that allows for the recovery of human multi- and pluripotent stem cells from the placenta following successful completion of pregnancy.

The "immediate synergy" between Celgene and Anthrogenesis, said Ann Healy, spokeswoman for Celgene, is in the stem cell transplant units that are the standard of care for hematologic cancer. Through the acquisition, Celgene will be able to provide therapeutic stem cell transplant units sourced by Anthrogenesis to oncologists, a new focus for Celgene. Celgene said there are more than 100,000 people diagnosed annually with blood cancers that can be treated with stem cell transplants, but because of shortages of matched transplant units, they cannot be treated. Celgene hopes to change that.

"Using Anthrogenesis' technology we will broaden the number of people that can get this therapy," Healy told BioWorld Today.

Celgene's flagship product, Thalomid, was approved in 1998 for the acute treatment of cutaneous manifestations of moderate to severe erythema nodosum leprosum and as a maintenance therapy for prevention and suppression of cutaneous manifestation recurrences. It is being studied in a number of other indications.

Celgene's research into hematologic diseases has left it "very aware of the significant potential of stem cell therapies," Jackson said in the call, adding that the collection of stem cells from placentas does not carry the public stigma of embryonic stem cell harvesting. "We are building strong preclinical data and an intellectual property position on the use of small-molecule drugs to influence stem cell differentiation," he said.

Thalomid achieved sales of $82 million in 2001. The company's other marketed drug, Focalin, is partnered with Novartis AG, of Basel, Switzerland. It won FDA approval as a treatment for attention-deficit/hyperactivity disorder in November 2001. Novartis licensed worldwide marketing rights, excluding Canada, to the drug and all related intellectual property and patents from Celgene. (See BioWorld Today, Nov. 16, 2001.)

Separately, Celgene said Thursday it would present at the 20th annual Chemotherapy Foundation Symposium interim data showing 13 of 17 evaluable patients with follicular or papillary thyroid cancer and two of six evaluable patients with medullary thyroid cancer experienced a plateau or decline in total tumor volume. Also, mortality in patients who experienced either a plateau or decline in their tumor volume was delayed compared with patients who had progressive disease.

Celgene, of Warren, N.J., expects the merger to be 5 cents to 10 cents dilutive to earnings in 2003, but 5 cents to 10 cents accretive in 2004, and have a positive impact on earnings from that point on. Jackson said the acquisition does not affect Celgene's expectation of being profitable in 2003. Anthrogenesis will stay in its present location and no employee cuts are expected. For now, Celgene has a new service to push along with its two marketed products.

"That is what we think has potential in the near term," Healy said. "But we also can accelerate our research collaboration with Anthrogenesis and, through its stem cell technology, we can expand our product portfolio and accelerate the development of Anthrogenesis products."