Amgen expands footprint

THOUSAND OAKS, Calif.—Amgen Inc. recently announced that itis expanding its operations in Brazil, acquiring Bergamo, a cancer drugcompany, for $215 million and regaining the rights to market some of its ownproducts in Brazil.

The moves provide "an attractive entry into the Brazilianmarket," Amgen CEO Kevin Sharer said in a statement.

According to Richard Davies, Amgen's vice president andregional general manager, the company's push into Brazil makes good businesssense.

"Brazil is among the top 10 pharmaceutical markets in theworld, and in recent years has been growing at a rate of about 12 percent peryear," he says. "It is expected to be the world's fifth largest pharmaceuticalmarket by 2015."

Davies notes that in its 95-year history, Bergamo hasinvested in research and technology to develop solutions in oncology,dermatology and reproductive health.

"Together with the existing research and developmentoperations of Amgen Brazil, the newly expanded entity will continue to findsolutions and make medicines available to patients in Brazil who suffer fromgrievous illnesses," he says.

With the biotechnology business in Brazil essentially in itsearly stages of development, Davies says Amgen realizes the potential forfuture growth.

"Amgen's acquisition of Bergamo—along with the recent moveto regain the rights to certain Amgen products from a Brazilian distributor,Mantecorp (now a subsidiary of Hypermarcas)—enables Amgen to further expand itsfootprint in this important growth market and build on our existing R&Dactivities in the country," he says. "Through these two agreements, Amgen hasimmediate access to the market, in-country capability and a firm foundationfrom which to further build our business, enabling us to further our mission ofserving patients with serious illnesses."

Bergamo is a leading supplier of medicines to the hospitalsector in Brazil with capabilities in oncology medicines and has manufacturingfacilities in Sao Paulo. Bergamo had gross revenues of $80 million in 2010 andhas been growing at an annual rate of 19 percent since 2007.

According to Davies, Amgen is retaining Bergamo's staff, andunder Amgen's ownership, Bergamo will continue to manufacture and marketproducts in the Bergamo portfolio in Brazil.

"At this time, although owned by Amgen, we expect thatBergamo will continue to operate as Bergamo indefinitely and will continue tosell Bergamo products under the Bergamo name," he adds. "Amgen plans to sellits medicines in Brazil under the Amgen name."

Now part of the Asia and Latin America region within Amgen,which is led by Davies, Bergamo's management will continue to oversee theBergamo operations on an interim basis while Amgen searches for a generalmanager who will oversee the business. The new general manager will report toDavies.

The focus on Brazil is part of a wider internationalexpansion strategy for Amgen as it becomes more like large pharmaceuticalcompanies, which are looking to reap more sales from Brazil and other emergingmarkets.

Robert A. Bradway, Amgen's president and COO, says thecompany's plans for continued international expansion are expected to result inmore than $1 billion in annual sales from existing products in new and emergingmarkets by 2015.

Pressure is also mounting on the biotechnology company toinitiate a dividend, which would also bring it more in line with drugmakers. Tothat end, Amgen announced in April it will declare its first quarterly dividendwith its second quarter 2011 earnings results. The deals may be the tip of theiceberg for Amgen.

"We expect Amgen to continue to be acquisitive and seesimilar transactions," Deutsche Bank analyst Robyn Karnauskas writes in aresearch note.

Over the past five years, Amgen has announced acquisitionsworth a combined $1.6 billion. The largest was its $425 million purchase ofBioVex Group Inc. in January.

According to Davies, Brazil isn't the only market on Amgen'sradar.

"We are planning to launch robust commercial operations inChina, Mexico, Turkey, Korea, Russia and other large and rapidly growingmarkets," he says.

That effort also led to Amgen entering into an agreement inprinciple with Hypermarcas to reacquire the rights in Brazil to several ofAmgen's innovative medicines, two of which are already approved in Brazil,Vectibix (panitumumab) and Mimpara (cinacalcet) and a third, romiplostim,(registered as Nplate in the United States), a treatment for the blood disorderITP, which is currently under review by ANVISA, the regulatory authority inBrazil.

"Regaining the rights to certain Amgen products in Brazil,together with acquiring Bergamo, a profitable company with an established localinfrastructure, provides us a cost-effective entry into the Brazil market,enabling us to further our mission of serving patients," Davies explains.