Investors Still Wary of Amgen-Immunex Deal
Advanced talks over Amgen Inc.’s proposed acquisition of rival Immunex Corp. continued Friday despite renewed signals from Wall Street that investors disliked the complicated $17-billion deal.
Immunex shares fell $1.34 to $25.62, giving up nearly half of Thursday’s gain, and Amgen shares closed at $56.03, off $4.16, as analysts raised questions about the role of American Home Products, which owns a stake in Immunex and holds marketing rights to some of its drugs.
The boards of Amgen, Immunex and AHP are scheduled to meet at different times Sunday, with an announcement expected by Monday if they approve the Amgen acquisition, according to sources close to the deal.
Amgen’s offer is 85% stock and 15% cash, according to a knowledgeable source, and would leave AHP with a stake in Amgen. Amgen, based in Thousand Oaks, plans to offer slightly more than $30 a share in cash and stock for smaller Immunex, including the 41% of Immunex stock held by American Home.
Representatives of the three drug companies declined to comment Friday on what they called “market rumors” about a deal.
The proposed deal is a watershed for conservatively run Amgen and an important test for Chief Executive Kevin Sharer as he seeks to transform Amgen from a two-drug company into a full-fledged pharmaceutical firm.
The deal would unite biotechnology companies with complementary scientific strengths, analysts said. Immunex develops drugs that block unwanted cellular activity, such as inflammation, while Amgen is a leader in producing drugs that nudge cells into action. Amgen’s top-selling drug, Epogen, spurs production of red blood cells.
“It would create an unrivaled powerhouse in biotechnology,” said Dennis Harp, an analyst with Deutsch Bank Alex. Brown. But, “it will take a while for the deal to pay off,” he said, which is one reason why impatient investors drove down Immunex shares Friday.
Analysts also attributed the adverse market reaction to uncertainty over AHP’s commitment to the deal.
The transaction would help AHP on the financial front at a time when it is facing massive legal liability from the fen-phen diet drug it no longer sells. The Madison, N.J., pharmaceutical company has reportedly paid $12 billion to plaintiffs.
In addition, AHP would hold on to what is seen as the crown jewel of the transaction, marketing rights to Enbrel, Immunex’s blockbuster rheumatoid arthritis drug. AHP would continue to co-promote Enbrel in the United States and Canada and retain its exclusive international marketing rights to the drug under the proposed deal, according to knowledgeable sources, though exact terms were said to be under discussion.
Some analysts believe Enbrel could rack up sales of $4 billion by 2005. It is expected to post sales of $750 million this year.
Doubt centered on how the deal would impact AHP in the long term. Like many large pharmaceutical companies, AHP must build its business with a steady stream of new drugs to replace those facing competitive pressures or coming off patent. In Immunex, AHP has a promising source of potential products, said John McCamant, editor of the Medical Technology Stock Letter in Berkeley.
Indeed, AHP has a “first look” deal with Immunex that gives it first dibs on co-marketing compounds under development at Immunex. But a source familiar with Amgen’s offer for Immunex said AHP would give up those rights as part of a takeover deal.
A surprising aspect of the deal, according to analysts, is Amgen’s apparent willingness to share marketing rights to Enbrel. Amgen has bristled for years under a similar partnership with Johnson & Johnson involving Amgen’s anti-anemia drug, known generically as EPO, the world’s best-selling drug. Amgen in September launched a second-generation product called Aranesp that it hopes will reclaim billions of dollars in sales it long ago ceded to J&J.;
Sources close to the Immunex deal said Amgen and AHP believe they can work together. But McCamant said the relationship is puzzling.
Samuel Isaly, manager of the Eaton Vance Worldwide Health Sciences Fund, said he thinks an Amgen-Immunex marriage “could be a good deal because it makes Amgen a powerhouse.”
