BMS, AstraZeneca Join Forces in $7B Combo Deal for Amylin Pharmaceuticals
By Catherine Shaffer
Bristol Myers Squibb Co., of New York, will realize operating synergies and tax benefits in addition to gaining access to Amylin Pharmaceuticals Inc.'s GLP-1 franchise, executives said in a Monday morning conference call regarding the pharma giant's acquisition of San Diego-based Amylin and partnership agreement with AstraZeneca plc.
"We believe there is leverage in offering a combination of our Onglyza, Amylin's GLP-1 franchise and potentially Forxiga," said Charles Banker, BMS' chief financial officer.
Forxiga (dapagliflozin) is an SGLT2 inhibitor that recently received a positive opinion from the European Committee for Medicinal Products for Human Use.
BMS and London-based AstraZeneca have teamed up to execute a uniquely structured takeover of diabetes firm Amylin for a total value of $7 billion. Amylin's assets include GLP-1 agonist Byetta (exenatide) and its extended-release equivalent Bydureon, lipodystrophy drug Metreleptin and Symlin (pramlintide acetate), and the company has been on the market for acquisition for some time. Rumors flew in March over a rebuffed takeover attempt by BMS, but neither company confirmed them publicly. This time around, BMS enlisted AstraZeneca as a partner in the transaction in order to offer a price that would satisfy Amylin's investors.
Under the merger agreement, BMS will purchase Amylin's stock for $31 dollars per share, for an aggregate price of $5.3 billion. Additionally, BMS will settle Amylin's obligation to Eli Lilly and Co. for another $1.7 billion.
Upon closing of the merger, AstraZeneca will come in as a partner on Amylin assets for $3.4 billion, sharing equally in profits and losses of those assets. AstraZeneca also has the option, for another $135 million, to gain equal strategic and financial decision-making authority related to those assets.
Amylin and Lilly broke up their decade-long partnership in November 2011 as a result of ongoing litigation over Lilly's marketing of Trajenta (linagliptin) with Boehringer Ingelheim GmbH using the same sales force that marketed Byetta and Bydureon.
The breakup put Amylin on the market for a new partner, and made it a very hot takeover prospect. BMS, AstraZeneca, Merck & Co. Inc., Takeda pharmaceutical Co. Ltd. and Roche AG were among the companies expected to take an interest based on compatible diabetes portfolios.
Upon closing of the merger agreement, which is deemed a sure thing by market observers, and execution of the partnership, Amylin's assets will join AstraZeneca's DPP-4 inhibitor Onglyza (saxagliptin) in the new entity's combined diabetes portfolio.
Analysts have applauded the acquisition, hailing the potential multibillion dollar market for products like Bydureon. BMS' offer of $31 per share represents a 41 percent premium to its initial bid of $22, and a 95 percent premium over Amylin shares prior to that, raising expectations for additional mergers and big-dollar deals in the near term.
"We expect consolidation in the biotech space to continue to be driven by commercial or near commercial assets given the need for pharmaceutical companies to replace revenues lost to patent expiration," wrote Ian Somaiya, an analyst with Piper Jaffray, who pointed to Biomarin Pharmaceutical Inc., Affmayx Inc., Theravance Inc. and Rigel Pharmaceuticals Inc. as potential acquisition targets offering new products with high revenue potential.
However, whereas the market for GLP-1 agonists is large and growing, it is also an increasingly crowded market as new products and companies have entered. Victoza (liraglutide, Novo Nordisk A/S) is already on the market, along with Byetta and Bydureon. (See BioWorld Insight, June 18, 2012.)
Additionally, GlaxoSmithKline plc is in late-stage trials with albiglutide, having reported mixed detailed results for its Harmony 6 and Harmony 7 trials. Partners Zealand Pharma A/S and Sanofi SA also are in late-stage trials with lixisenatide, an oral once-daily GLP-1 inhibitor, which is under regulatory review in Europe and Japan. (See BioWorld Today, June 13, 2012.)
Earlier-stage competitors include Glymera, a Phase II GLP-1 agonist from PhaseBio Pharmaceuticals Inc., which hopes to make use of the product's long half-life and very slow absorption profile to offer a once-weekly product.
Among that field of competitors, Bydureon is viewed by some as a troubled and struggling program. The FDA recently revealed that the application process for Bydureon was complicated in part due to "Amylin's withholding of information on Byetta that FDA deemed to be important to its evaluation of the safety and effectiveness of Bydureon." (See BioWorld Today, June 27, 2012.)
Amylin submitted Bydureon three times before the FDA finally approved it. It received a complete-response letter (CRL) in March 2010 due to issues related to manufacturing and the drug's risk evaluation and mitigation strategy. Then the FDA slapped the drug with a second CRL seven months later asking for a thorough QTc study to evaluate the risk of higher-than-therapeutic doses of Bydureon on the cardiovascular safety profile. (See BioWorld Today, March 16, 2010, and Oct. 21, 2010.)
That history has led to a perception that Bydureon is a weaker product, particularly compared to once-daily Victoza. However, that sentiment is essentially a minority report amid generally positive opinions of the deal.
"While the near-term [earnings-per-share] benefits of the transaction will be muted," Leerink Swann's Seamus Fernandez noted, the long-term opportunity will be determined by three factors: BMS' and AstraZeneca's ability to enhance Bydureon's worldwide growth, the manufacturing and development execution for the Bydureon pen and suspension and potential upside should the ongoing EXSCEL CV outcomes study succeed.
The Phase IIIb/IV study EXSCEL is designed to enroll 9,500 patients and will test the effect of Bydureon, in conjunction with standard care for glycemic control, on major macrovascular events in patients with Type II diabetes.
The $7 billion Amylin deal joins a string of huge deals in the first half of 2012, including AstraZeneca's acquisition of Ardea Biosciences Inc., of San Diego, for $1 .26 billion; Amgen Inc.'s acquisition of Micromet Inc. for $1 . 16 billion; and BMS' acquisition of Inhibitex Inc. for $2.5 billion. There's also the $2.6 billion unsolicited offer from GlaxoSmithKline for Human Genome Sciences Inc., which has been rejected three times. (See BioWorld Today, Jan. 10, 2012, Jan. 27, 2012, April 24, 2012, and May 16, 2012.)
The merger activity for the first half of 2012 already has a significant lead on 2011 , which saw only eight mergers valued at more than $1 billion the whole year. That included the acquisition of Cephalon Inc. by Teva Pharmaceutical Industrie Ltd. for $6.8 billion and Sanofi's acquisition of Genzyme Corp. for $21.2 billion.
Excitement is building, as it appears that big pharma has broken its inertia and is finally back on the market for biotech companies and biotech products, and that activity will finally provide the badly needed exits and endpoints that investors need in order to feel confident investing in early stage science.
Amylin's stock (NASAQ:AMLN) gained $2.50, or 8.9 percent, to close at $30.71 Monday.
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