Friday's move by Amgen Inc. to acquire Synergen Inc. for as muchas $258 million may be the biggest financial deal of the year in thebiotechnology industry, but Wall Street analysts said they weren'tsurprised by the takeover.
Amgen's buyout offer of $9.25 per share for 27.9 million Synergenshares sent the Boulder, Colo., company's stock (NASDAQ:SYGN)up 68 percent Friday to close at $9.03. Amgen (NASDAQ:AMGN)was down 19 cents to $56.87.
"Amgen has said it plans to do one or two of these deals a year," saidEd Hurwitz, an analyst with Robertson, Stephens & Co. in SanFrancisco. He added that rumors of the Synergen buyout have beencirculating for weeks.
Matthew Geller, an analyst with Oppenheimer & Co. in New York,said the acquisition is good news for the industry in that itdemonstrates buyers are willing to look at struggling companies withpotentially valuable product pipelines, even though they might haveexperienced clinical trial failures with other drug candidates.
(There have been 36 new biotech-biotech alliances formed in 1994.For an overview of those deals, see BioWorld Financial Watch, Nov.14, Aug. 29 and May 23.)
Other companies in that category, according to Edmund Debler, ananalyst with Mehta & Isaly in New York, are Cortech Inc., ofDenver, Cephalon Inc., of West Chester, Pa., Gilead Sciences Inc., ofFoster City, Calif., Xoma Corp., of Berkeley, Calif., and RegeneronPharmaceuticals Inc., of Tarrytown, N.Y. Regeneron has at least twoon-going collaborations with Amgen.
Synergen has been searching for a buyer since its Phase III trials ofAntril for sepsis failed in July.
On Friday, Thousand Oaks, Calif.-based Amgen said it will pay$9.25 per share for Synergen's 25.9 million outstanding shares, or$240 million, in an offering that will begin no later than Nov. 29 andrun for at least 20 business days. The acquisition also could includeanother 2 million option shares, bringing the cost of the buyout toabout $258 million.
Among Synergen's assets are about $120 million in cash as well as$200 million of net operating loss, which carries over to Amgen.
Hurwitz said the net operating loss, which is tax deductions, willgive Amgen as much as a 10 cents-per-share earnings' flexibility inany one year.
(For more details on the terms of the deal, see BioWorld's SpecialNews Bulletin, published on Friday, Nov. 18, 1994.)
Synergen's Disease Programs Fit With Amgen's
David Kaye, a spokesman for Amgen, said his company wasinterested in Synergen's neurobiological and inflammatory diseasesprograms, which fit in well with Amgen's work.
"We want to bring their neurobiological people to California andsend our inflammatory people to Boulder," he said.
In addition to continuing a Phase II of Antril for rheumatoid arthritis,other products Amgen will get from Synergen are: ciliary neutrophicfactor (CNTF) in Phase II/III trials for Lou Gehrig's disease; tumornecrosis factor binding proteins in Phase I safety studies forinflammatory diseases, including rheumatoid arthritis and multiplesclerosis; and glial derived neurotrophic factor (GDNF) and nervegrowth factor (NGF), both of which are in preclinical development.
Synergen was developing CNTF and NGF in association with SyntexCorp., of Palo Alto, Calif., which has been acquired by Switzerland-based Roche Holdings Ltd. Those agreements will transfer toAmgen, which has another collaboration with Roche.
"If CNTF works," said Hurwitz, "Amgen looks brilliant." But hesuggested the "most exciting" potential drug is GDNF.
Hurwitz noted the compound was discovered by Frank Collins, wholeft Synergen in 1993 to join Amgen as director of neuroscience.
"This is a great deal for Amgen," said Joyce Lonergan, an analystwith Cowen & Co. in Boston. She said Amgen is more interested inSynergen's earlier stage development projects than it is in CNTF andAntril and she observed the buyout demonstrates Amgen "is not asinert" as critics have suggested.
Amgen has some familiarity with CNTF through Regeneron.Although the two are collaborating on other neuroscience projects,earlier this year Regeneron discontinued its CNTF program for LouGehrig's disease after disappointing Phase III trial data.
Debler questioned the maze of alliances involving Amgen,Regeneron, Syntex and Roche (which also owns 65 percent ofGenentech Inc., of South San Francisco), saying it "creates acollaborative-competitive horizon that is muddled."
He suggested Amgen and Syntex eventually may end co-development of CNTF and NGF.
Hurwitz described the Synergen buyout as a "hiccup" for Amgen.The company had $700 million in cash as of Sept. 30 and isgenerating about $500 million a year in net income.
Amgen estimated the Synergen buyout would reduce its earnings by10 cents a share in 1995 and 5 cents a share in 1996 because ofincreased research and development costs. n
-- Charles Craig
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