Washington Editor

Amgen Inc. is selling the Japanese rights to 13 molecules, including the FDA-approved colorectal drug Vectibix (panitumumab), to Takeda Pharmaceutical Co. Ltd. in a deal potentially worth more than $1 billion.

Under the deal, Thousand Oaks, Calif.-based Amgen will receive $200 million up front. The firm could bank an additional $362 million if certain milestones are achieved and double-digit royalties on sales in Japan. Osaka, Japan-based Takeda also will pay Amgen up to $340 million in expected worldwide development costs over the next several years for the molecules, which include early to midstage candidates to treat cancer, inflammation and pain.

As part of the deal, Takeda plans to acquire all shares of Amgen's Japanese subsidiary, Amgen KK, which was established in March 1992. The share transaction is expected to close in the first quarter.

Amgen also is granting Takeda worldwide rights to motesanib diphosphate (AMG 706), an oral agent being evaluated as an inhibitor to angiogenesis by targeting vascular endothelial growth factor receptors 1, 2 and 3.

The compound also is under investigation for its potential direct antitumor activity by targeting platelet-derived growth factor receptor and stem cell factor receptor signaling.

Amgen will receive $100 million up front, $175 million in success-based milestones for the first two indications approved for motesanib diphosphate and double-digit royalties on sales in Japan. Amgen also is eligible to receive 50 percent of profits outside Japan for motesanib diphosphate, which is in Phase II development as a monotherapy in thyroid cancer and in combination with other anticancer therapies to treat patients with non-small-cell lung, breast and colorectal cancers and other solid tumors.

The deal calls for Takeda to pay 60 percent of ongoing clinical development expenses outside Japan.

While the Japanese development rights for the 13 molecules "makes strategic sense," said Morgan Stanley analyst Steven Harr, Amgen's partnership on motesanib diphosphate is "harder to understand."

"There is no compelling strategic or commercial rationale for Amgen to build a large Japanese presence, and the broad pipeline development agreement increases strategic flexibility for important geographic territories for its business," Harr said in a research note.

But, he added, "We do not understand the AMG 706 partnership, though, as Amgen needs to diversify its risk away from its current business, and a long-term profit share on one of the molecules on which management has placed significant priority suggests either 1) the company is managing its bottom line too aggressively for the long-term health of the business or 2) management has a less optimistic view of this drug, which is targeting a crowded development space."

Harr said he expects the Takeda deal to have minimal near-term impact on Amgen's stock.

While Amgen's stock has taken a beating over the past year because of safety concerns raised about its anemia drug products Epogen (epoetin alfa) and Aranesp (darbepoetin alfa), the firm's osteoporosis drug candidate denosumab "remains a viable and increasingly less risky potential product," Harr said.

Recent data showed that patients administered denosumab, a fully human monoclonal antibody designed to target RANK ligand, a primary mediator of the formation, function and survival of osteoclasts, had a 40 percent higher bone-mineral density at the hip than patients who received Merck & Co.'s Fosamax (alendronate sodium).

Shares of Amgen (NASDAQ:AMGN) were down 18 cents Monday, to close at $47.18.