Amgen and Onyx finally seal an acquisition deal
THOUSAND OAKS & SOUTH SAN FRANCISCO, Calif.—Amgen Inc. got a nearly 8-percent boost on its stock prices at Monday's market close after the Aug. 25 announcement that it had reached an agreement to acquire Onyx Pharmaceuticals Inc. for $125 per share, which comes out to about $10.4 billion, or $9.7 billion net of estimated Onyx cash.
This followed some tension in the previous week, when it was reported early in the week, via information from unnamed sources close to the deal, that Onyx's unwillingness to release early trial data results for its European approval of blood cancer drug Kyprolis were causing Amgen to balk at continuing with acquisition talks at a point when they had supposedly reached a potential target of $130 per share. Then came anonymously released news from insiders on Friday that Amgen was pushing for a lower price after Onyx failed to release the data and, that same day, more news leaking that Onyx had finally released the data—to Amgen and all other parties interested in acquiring Onyx.
That $130 price tag obviously was not reached, for whatever reason, but it is higher than the $120 per share originally offered about two months earlier, which Onyx refused and said "significantly undervalued Onyx and its prospects." After that, Pfizer is said to have dropped out of the running because the price was too high for it, and analysts began speculating that a suitor—whether Amgen or someone else—might go as high as $180 per share. By that time, Amgen and Onyx were saying almost nothing to the media, at least officially, about what they were saying to each other, and the most significant news out of either company until Sunday, Aug. 25 was Onyx saying that Amgen wasn't alone in wooing the company and that it didn't have a lock on the acquisition.
Now, we're at the point where Amgen is ready to seal the deal and the boards of both companies have agreed to an acquisition that should close at the beginning of the fourth quarter, subject to the satisfaction of customary closing conditions, including the receipt of regulatory clearance.
"Amgen has a unique opportunity to add value to Kyprolis, a product which is at an early and promising stage of its launch," noted Robert A. Bradway, chairman and CEO of Amgen, who also said, "Amgen is ideally suited to realize the full potential of Onyx's portfolio and pipeline for the benefit of physicians and patients. Our acquisition of Onyx follows a thorough due diligence process and is fully consistent with our strategy of advancing innovative medicines that address serious unmet medical needs. We expect this acquisition will accelerate growth and enhance value for Amgen shareholders.
As the companies both noted in the news release about the finalization of their agreement, Onyx has "an important and growing multiple myeloma franchise," with Kyprolis (carfilzomib) for injection already approved in the United States and undergoing clinical trials for approval in Europe. In addition, Onyx has three partnered oncology assets: Nexavar (sorafenib) tablets with Bayer HealthCare, Stivarga (regorafenib) tablets with Bayer compound and palbociclib with Pfizer Inc. compound. Onyx also has multiple other oncology compounds in various stages of clinical development.
As for the most recent potential oncology gem, Onyx holds global rights to Kyprolis, excluding Japan, and Kyprolis has an orphan drug designation in the United States with exclusivity until July 2019, and U.S. patents which extend until at least 2025.
"Kyprolis, currently marketed in the U.S., is already off to a solid start and represents significant commercial potential. It has orphan drug status in the U.S. until July 2019 and is currently in several studies including the ASPIRE (interim analysis in 2014) and FOCUS (data in 2014)," wrote Zacks Investment Research in a bullish research note. "Results from these studies would support EU filing. Kyprolis sales were about $125 million in the first half of 2013. Sales should be driven by launch in additional countries and expansion into additional indications."
With this acquisition, Amgen will be strengthening its presence in the oncology market, Zacks points out, and Onyx's marketed products thus far cover relapsed and refractory multiple myeloma, liver and kidney cancer, metastatic colorectal cancer and metastatic gastrointestinal stromal tumors. Advanced pipeline candidates and pending approvals also include drugs for advanced breast cancer, multiple myeloma and thyroid cancer.
"With key products in Amgen's portfolio slated to lose exclusivity in the coming years, contributions from Onyx Pharma's products should help make up for a part of the revenues that will be lost to generic competition," Zacks notes, "We are positive on this deal which makes strategic sense."
Other market watchers were also generally upbeat about the deal. Piper Jaffray upgraded Amgen shares to "overweight" from "neutral" and suggested Kyprolis could generate sales of more than $3 billion by 2025, while Brean Capital, looking at the combined value of Kyprolis and another blood cancer drug, Oprozomib, sees combined sales of more than $4 billion.