By Jim Shrine
Agouron Pharmaceuticals Inc., a biotechnology company with one product on the market and stock that was trading in the $20 range as recently as six months ago, agreed to a $2.1 billion acquisition by Warner-Lambert Co.
The deal will be accomplished through a stock swap that grants about $60 in Warner-Lambert stock (NYSE:WLA) for each share of Agouron. The deal was announced after the market closed Tuesday. Trading was halted on Agouron's stock (NASDAQ:AGPH) an hour earlier, at a price of $56.81, up $3.66 on the day.
"From Agouron's perspective this is unbelievably favorable," Agouron's President and CEO Peter Johnson told BioWorld Today. "We get the opportunity to pursue our original mission to bring forward through commercialization products in virology and oncology. Our horizons are undiminished. We're in a better position to accomplish that with access to the global infrastructure of Warner-Lambert."
"We at Agouron see this not as the end of a dynamic discovery-based company but the beginning," Johnson said earlier, in a joint conference call with Warner-Lambert officials. "We look forward to making major contributions to Warner-Lambert for years to come."
Jay Silverman, a senior analyst at BancBoston Robertson Stephens in New York, said an acquisition of Agouron was expected and it came in at a price within the range of recent speculation. Rumors of a buyout by suitors such as Pharmacia and Upjohn and DuPont have been swirling since last summer and helped drive the stock price up, he said.
"But it definitely has positive implications for the biotechnology industry," Silverman told BioWorld Today. "It means the pharmaceuticals find value in these companies, particularly those with novel products. I think what you're going to see, and what we have seen, is they will be looking for more novel products to license in as the drug industry pipeline continues to dry up. This is clearly one example, and there could be several more."
Agouron brings Warner-Lambert, of Morris Plains, N.J. - and its Parke-Davis pharmaceuticals group - the market-leading HIV protease inhibitor, Viracept. And it brings a strong pipeline as well as research capabilities in structure-based drug design and a combinatorial chemistry library with 400,000 compounds.
"This is a strategic acquisition," Peter Wild, the president of Warner-Lambert's pharmaceuticals sector, said in the conference call. "We're making a major play in research and development. We've been a rapidly growing company over the last couple of years. This adds a whole new dimension. It enables us to accelerate our plans for R&D and commercial development in [virology and oncology]."
Johnson said Agouron is excited about the opportunity of applying its technology to areas outside of cancer and virology.
Agouron would remain in La Jolla, Calif., essentially becoming a ninth Warner-Lambert research center, Wild said. He also pointed out his company has established 22 collaborations with biotechnology companies in the past two years.
Highlighting that push, Wild said, is that Warner-Lambert more than doubled its worldwide pharmaceutical business in the last two years. In 1996 the revenues totaled $2.5 billion; they are expected to exceed $7 billion by the end of this year, he said.
Agouron, in an Oct. 20 SEC filing, projected sales of Viracept to be $430 million to $440 million in North America in fiscal 1999. Sales for the quarter that ended Sept. 30 were about $134 million. Viracept was approved in March 1997.
Two of the most advanced products in Agouron's pipeline are Remune, which is in Phase III trials and is designed to stimulate the immune responses of HIV patients; and AG3340, a matrix metalloprotease inhibitor, which is in Phase III in solid tumors, and in the clinic for macular degeneration. Johnson said both could reach the market in 2001. Agouron also has products in earlier stages of development, as well as some nearing the clinic.
Agouron has about 1,000 employees. It went public in 1987 at $10 per share and later had a 2-for-1 stock split. n