Amgen to Buy Rival Tularik
Moving to bolster its drug development pipeline, biotech giant Amgen Inc. agreed Monday to buy rival Tularik Inc. for $1.3 billion.
The deal would give Amgen access to a trove of potential medications for cancer and inflammatory disease -- among the hottest areas of drug research. If approved by shareholders, the transaction would come less than a year after Amgen spent $120 million for a 21% stake in Tularik, which it wanted in order to obtain rights to early-stage cancer drugs.
The proposed acquisition of the whole company underscores Thousand Oaks-based Amgen’s desire to broaden its product line into pills, the focus of Tularik’s research. Amgen is best known for injectable drugs produced in living cells, the traditional biotech medications.
The deal also demonstrates Amgen’s hunger for medications with strong commercial prospects, in order to keep the company’s growth engine humming. Amgen is large, so it needs to add several billion in sales each year to maintain earnings growth of more than 20%.
Wall Street responded enthusiastically, pushing Amgen’s shares up $1.46, or 3%, to $59.55. Tularik’s shares soared 44%, rising $7.53 to $24.53. Both trade on Nasdaq.
Tularik, based in South San Francisco, has no products, but its chief executive is David Goeddel, a celebrated scientist who while at Genentech Inc. had a hand in developing human insulin and human growth hormone, that company’s first drugs.
Goeddel said he would continue to run Tularik’s research operations under an employment contract with Amgen. “My intention is to see the drugs we put 12 years into become a success,” he said.
Monday’s agreement values Tularik at $25 a share, a 47% premium over Friday’s closing price of $17.
Analysts said the centerpiece of the deal was T131, an experimental diabetes pill with annual sales potential of $1 billion.
Tularik was in talks with three drug companies eager to license the pill before Amgen made an offer for the company, Goeddel said.
Jason Zhang of Independent Research Group said the medication was two to three years away from the market but so far appeared to have avoided the problem of weight-gain associated with existing diabetes drugs.
“It could be a blockbuster,” he said, “and Tularik was not shy about saying they thought they could get a lot for it.”
Amgen, however, said it wanted all of Tularik, not just one drug.
“I think this is almost a direct consequence of our starting to work together,” Goeddel said. “They saw the value we had in our people and our projects.”
Goeddel said that he and others at Tularik realized it would take large amounts of outside financing to move their drug projects forward.
The company didn’t want to be sold at first, he said, but “we decided that it made sense to have just one partner instead of a lot.”
Eric Schmidt of S.G. Cowan said Amgen’s interest in Tularik may be driven by a setback with a diabetes drug that Amgen licensed for more than $80 million last summer from Biovitrum, a Swedish biotech.
Amgen told Wall Street last week that the drug needs more study.
Schmidt said that Amgen predicted the deal wouldn’t derail the company’s earnings targets for 2004, a sign that Amgen had been doing a little better than expected.