Robert Hugin, chairman and CEO of Celgene Corp., wasn't kidding when he told attendees at this month's J.P. Morgan Healthcare Conference that 2011 was a "year of momentum" for the giant biotech. (See BioWorld Today, Jan. 10, 2012.)

Propelled by another year of solid growth, Summit, N.J.-based Celgene scooped up privately held Avila Therapeutics Inc., of Bedford, Mass., Thursday in a deal potentially valued at $935 million.

The transaction calls for Celgene to pay $350 million in cash, plus up to $195 million for milestones related to the development and regulatory approval of Bruton's tyrosine kinase (Btk) inhibitor AVL-292, and up to $380 million in potential milestone payments contingent upon the development and approval of candidates generated from Avila's Avilomics platform.

The boards of both companies approved the deal, which came together after "many months" of discussions, according to Avila CEO Katrine Bosley.

Launched just five years ago, Avila made its name following a contrarian approach to develop targeted covalent drugs that treat diseases through protein silencing.

Avila inked a string of attractive partnering deals over the past two years. In December 2010, the company signed a potential $80 million alliance – including $40 million in up-front cash – with Sanofi SA, of Paris, to use its drug discovery platform to design targeted covalent drugs against six signaling proteins with relevance in oncology. (See BioWorld Today, Dec. 21, 2010.)

In May 2010, Avila partnered with Clovis Oncology Inc., of Boulder, Colo., for up to $209 million to develop epidermal growth factor inhibitors for non-small-cell lung cancer. And the previous July, the biotech inked a $200 million deal with Novartis Option Fund to develop an undisclosed target. (See BioWorld Today, July 28, 2009, and May 26, 2010.)

Celgene and Avila initially began talking about an arrangement similar to those partnerships. But the closer Celgene looked at Avila's science platform, the more it found to like.

"We recognized the strategic value, not just for the product but also for the platform, in amplifying our internal efforts and our thinking about early translational advantages that we can realize," Tom Daniel, president of research and early development for Celgene, told BioWorld Today.

In the short term, AVL-292 positions Celgene to grow its presence in cancer. The orally available drug has completed two Phase Ia studies and is in a Phase Ib in hematological cancer.

AVL‐292 selectively and covalently bonds to Btk to inactivate and silence its activity, a mechanism of action that confers greater target selectivity and a longer duration of action than is typical of conventional small-molecule drugs. Increasingly, inhibiting Btk is viewed as a promising approach to treat diseases that are driven by B cells, including hematologic cancers such as non-Hodgkin's lymphoma and B-cell chronic lymphocytic leukemia as well as autoimmune diseases such as rheumatoid arthritis.

"We are deeply committed to high-impact drugs in areas of unmet need, and the Btk opportunity falls directly into that sweet spot," Daniel said. "We are very excited about the pathway that Btk antagonizes."

Celgene plans to apply not only "standard clinical thinking" to the drug but also to seek innovative approaches, including novel-novel combinations, as part of its "immediate, scientific, rational, commercial strategy," he added.

Beyond AVL-292, Celgene was wowed by the potential of Avila's platform to propel its internal discovery and development efforts. Although early covalent drugs, including penicillin, were discovered serendipitously, Avila's Avilomics technology is designed to generate covalent drugs systematically, constituting a platform to create compounds that fight a broad spectrum of diseases through protein silencing. The targeted covalent drugs don't merely bind to a protein but form a durable bond that shuts down the protein's activity, leading to precise selectivity and retained efficacy against mutations.

Daniel made it clear that Celgene will keep the Avila team together and let them run with the technology, which Celgene also hopes to exploit for its discovery and development efforts.

"We have some very specific science that we think the platform can deliver," he said.

For its part, the acquisition gives Avila maneuvering room to advance a platform whose potential "is much broader than we could fully realize on our own," Bosley told BioWorld Today.

In the wake of the deal, much of buzz centered on Avila's unpartnered covalent candidates AVL-181 and AVL-192, which target the hepatitis C virus target NS3. Though the compounds are still in preclinical development, Avila's covalent approach to silencing the NS3 protein offers another promising approach to result in best-in-class HCV products that could potentially show activity across all HCV genotypes while effectively inhibiting drug-resistant mutations. Should the compounds move successfully through clinical trials, they could represent big wins in an increasingly crowded HCV landscape. (See BioWorld Today, Nov. 22, 2011, Jan. 10, 2012, and Jan. 25, 2012.)

The acquisition also is a success story for Avila's investors, which include venture capital firms Abingworth, Advent Venture Partners, Atlas Venture, Novartis Option Fund and Polaris Venture Partners.

"When we first invested in Avila, everyone said there was no way we were going to make an irreversible inhibitor," recalled Amir Nashat, a partner at Polaris Venture Partners and a member of Avila's board. "There was an incredible dogma against having a broad effort, even when you would remind people that 30 percent of the blockbuster drugs are irreversible inhibitors.

"We felt this was a great place to be contrarian," he added. "Now, there are multiple indications that people believe in irreversible inhibitors as a key part of a new class of molecules."

The deal structure suggests that Celgene clearly understands the broader potential of the platform, said Mike Bigham, a partner in Abingworth's Boston office and Avila's founding chairman and CEO.

"Celgene assigned significant value to the platform, from a milestone perspective, because they expect it has the potential to deliver, over time," Bigham told BioWorld Today. "While we certainly appreciate and agree with their excitement over AVL-292, the platform itself has very strong legs."

Analysts also endorsed the transaction. BMO Capital Markets analyst Jim Birchenough wrote in a research report that the acquisition positions Celgene "for sustainable long-term growth in a P&L friendly way."

Celgene expects to complete the Avila acquisition later this quarter. The company said it expects the transaction to be neutral to 2012 non-GAAP diluted earnings.

Within hours of disclosing the Avila deal, Celgene also expanded on preliminary 2011 financials reported at J.P. Morgan, reporting full year non-GAAP net product sales of $4.7 billion. Full year non-GAAP net income was $1.75 billion, for non-GAAP diluted earnings per share of $3.79. The company ended the year with $2.6 billion in cash and marketable securities.

The company said sales of Revlimid (lenalidomide) increased by 20 percent in the fourth quarter, to $855 million, driven by strong overall market share, increased duration of therapy and geographic expansion. Full-year Revlimid sales were $3.2 billion, an increase of 30 percent.

Thursday, the company's shares (NASDAQ:CELG) closed at $72.66, down $1.13.