Amgen to Buy Drug Firm
Encouraged by a successful drug trial, biotechnology giant Amgen Inc. said Wednesday it has agreed to acquire a Northern California collaborator for $2.2 billion.
The deal to buy Abgenix Inc. would give Amgen full ownership of Panitumumab, a cancer drug the two companies had been developing for colon cancer.
Thousand Oaks-based Amgen said the drug could one day have annual sales of $2 billion as a treatment for colon cancer and head and neck cancer. Analysts said the medicine could receive Food and Drug Administration approval in the second half of 2006 as a colon cancer therapy.
Amgen Chief Executive Kevin Sharer said his company made the offer for Abgenix after it learned the results of a successful Panitumumab trial last month. The deal means Amgen will not have to pay royalties to Abgenix for the drug or others that Amgen is developing using Abgenix technology, he said.
Abgenix, based in Fremont, Calif., genetically engineers mice to produce potential cancer drugs that mimic human antibodies.
Sharer said he believed that Abgenix was a “natural fit” for Amgen and that the deal, announced after the market closed Wednesday, “offered significant upside.”
Investors agreed, driving up the shares of both companies in after-hours trading. Abgenix soared $7.28, or 50%, while Amgen jumped $2.47, or 3%.
In regular trading, Amgen closed at $76.78.
Amgen said the deal would shave 5 cents to 10 cents a share from earnings in 2006 and 2007, but would pay for itself once Panitumumab sales reached $1 billion.
Under the terms of the deal, Abgenix shareholders would get $22.50 a share in cash, a 54% premium over Wednesday’s closing price of $14.65. The agreement requires shareholder approval and is expected to close early next year. The largest individual Abgenix shareholder, according to the company’s 2005 proxy, is Chairman R. Scott Greer, with 1.5% of outstanding shares worth about $30 million.
Geoffrey Porges, an analyst with Sanford C. Bernstein & Co., said the premium was justified because Abgenix shares were certain to rise next year with the success of its cancer drug.
Porges said acquisition of Panitumumab and Abgenix’s technology would allow Amgen to “catch up to Genentech,” its rival and a leader in cancer drugs. Although Amgen markets drugs that alleviate the side effects of chemotherapy, the company does not sell medicines treating the underlying disease.
The deal “makes a lot of sense” for Amgen, Porges said.
The acquisition confirms Amgen’s enthusiasm for Panitumumab, a drug that came to Amgen as a result of its 2002 purchase of Immunex Corp., Abgenix’s original collaborator.
In early November, Amgen and Abgenix said Panitumumab prolonged survival without progression of the cancer in patients who received the drug, compared with patients receiving only pain medicine and other supportive care. The study involved 463 patients with advanced colon cancer and no other treatment options.
The drug would compete with Erbitux, a cancer medicine marketed by ImClone Systems Inc. and Bristol Myers-Squibb Co. Investors have been divided on which drug would emerge as the preferred treatment. In after-hours trading Wednesday, investors voted against Erbitux, pushing ImClone’s shares down 3%, or $1.08. In regular trading, ImClone closed at $32.78.
Amgen produces drugs to treat anemia, rheumatoid arthritis and chemotherapy-related infections. Last year, it earned $2.4 billion on revenue of $10.6 billion.
Abgenix is not yet profitable but has more than 50 biotechnology, pharmaceutical and academic alliances -- including with competitors of Amgen -- related to its method of genetically engineering mice.
CEO Sharer said Amgen recognized that Abgenix’s so-called XenoMouse technology was “widely popular” in the industry and that Abgenix’s customers depended on it. Sharer said Amgen was “mindful of its obligations to supply customers.”
