In one of the largest biotech deals this year, Amgen Inc. caught the big fish, so to speak, by reeling in Tularik Inc. with a $1.3 billion takeover bid.
Tularik - named for Alaska's Tularik River, where the company's founders took fishing expeditions - is getting a fine value for its shareholders, analysts said. In fact, the acquisition appears to be a good fit for both companies - allowing Amgen to add five clinical programs to its pipeline and establish a presence in the San Francisco Bay area.
The value of the deal matches the $1.3 billion acquisition of Esperion Therapeutics Inc. by Pfizer Inc. that was completed in February. It also follows on Amgen's blockbuster acquisition of Seattle-based Immunex Corp. that completed in July 2002.
Tularik's stock (NASDAQ:TLRK) surged 44.3 percent Monday, or $7.53, to close at $24.53. Amgen's stock (NASDAQ:AMGN) rose $1.46 to close at $59.55.
When all is said and done, the sign out front of Tularik's current operations will read Amgen San Francisco, but not much else will change. David Goeddel, founder and CEO of Tularik, will take on the role of site head at the new wholly owned subsidiary, and about 300 Tularik research scientists - the majority of employees - will remain on staff.
"The primary motivation really had to do with adding their very strong and reputable scientific team," said Christine Cassiano, senior manager of Amgen's corporate communications. "And it does dramatically accelerate our planned expansion into the San Francisco Bay area."
Tularik's operations in South San Francisco are about 400 miles north of Amgen's offices in Thousand Oaks, Calif. Amgen, which holds a 21 percent stake in Tularik, would own 100 percent of the company upon the completion of the transaction expected in the second half of this year.
Andrew Perlman, executive vice president of Tularik, said the acquisition is positive for both companies. "I think that our research capabilities are very, very strong and make a great strategic fit with Amgen," he told BioWorld Today. "They bring additional resources so that we can move our new and promising programs into and through the clinic as fast as possible."
The transaction consists of a stock-for-stock swap. The ratio fixes Tularik's value at $25 per share for its 66 million outstanding shares, based on the average Amgen stock price during a set number of days. The $1.3 billion value is net of estimated cash to be acquired and net of Amgen's existing ownership of Tularik.
Amgen expects to incur a one-time charge related to in-process research and development. The company, however, is maintaining its 2004 earnings-per-share guidance of between $2.30 and $2.40. Once the acquisition is complete, Amgen expects research and development expenses to go up about $100 million per year for the next several years.
With it, Tularik will bring five clinical programs, including T67, which is in a pivotal trial for hepatocellular carcinoma. Other clinical programs focus on Phase II trials of T607 in gastric and esophageal cancer, T487 in inflammatory disease, and T131 in Type II diabetes, as well as a Phase I trial of T71 in obesity.
It's the diabetes program that most interested Amgen, said biotech analyst Eric Schmidt, of SG Cowen Securities Corp. in New York.
"I think Amgen took a look at that drug from a potential partnership standpoint and decided it was just best to buy the whole company," Schmidt told BioWorld Today.
T131 has blockbuster potential. Marketed drugs with similar mechanisms of action achieve about $1 billion in worldwide sales each year. "So if the data turn out to be good," Schmidt said, "it could be a $1 billion product."
In May 2003, the two companies began an oncology collaboration, resulting in Amgen's 21 percent stake in Tularik. The deal also meant $125 million in committed funding for Tularik, which needed a partner to move forward with its numerous cancer targets. (See BioWorld Today, May 22, 2003.)
"There was a lot of strength and momentum from that collaboration that really made the acquisition more compelling," Cassiano said. "It really allowed both companies to become more comfortable with each other's capabilities."
According to a research note by New York-based Leerink Swann & Co., the acquisition "makes strategic sense" to Amgen, as it boosts the company's late-stage oncology pipeline. The deal "could fill a much-needed near-term void."
Amgen, founded in 1980, is considered a harbinger of the biotech industry, with a worldwide staff of more than 10,000 employees and annual revenues of $5.5 billion in 2002. It is the industry's largest company with about 40 different clinical programs and several marketed products, including Aranesp, Neupogen and Enbrel
And Tularik is no small start-up. Founded in 1991, it focuses on a gene-regulation approach to drug discovery and has a staff of about 375. While the company has no marketed products, as of Dec. 31 it had cash, cash equivalents and marketable securities of $200.4 million - enough to take it through the first quarter of 2006.
"I think it's more something that Amgen needed to do," said Schmidt, who covers both companies. "Tularik has tremendous science and a number of very promising research-stage programs."
The boards of both companies have approved the transaction, expected to close later this year following Hart-Scott-Rodino Antitrust Improvement Act clearances and the approval of Tularik stockholders.
A research note by analyst Jason Zhang of New York-based IRG Research said regulatory hurdles should not get in the way of the acquisition "because there is little overlap between the companies' businesses." Furthermore, the 47 percent premium that Amgen is paying for Tularik, based on the May 26 closing price of $17, is "likely to win" shareholder approval.
Goeddel founded Tularik with Bob Tjian and Steve McKnight, naming the company after the Tularik River visited by the three men on several fly-fishing trips over the years. Tjian is a member of the company's scientific advisory board, while McKnight serves on the board. As the men cast their rods, they would talk about regulating gene expression in order to create small-molecule, oral medicines that were easy to use and manufacture.