Amgen Inc. will pay $13.4 billion for a blockbuster psoriasis drug from Celgene Corp., which is shedding the asset in order to win antitrust regulators’ sign-off for Celgene’s $74-billion merger with Bristol-Myers Squibb Co.
The all-cash deal will give Amgen a growing product at a time when the blockbuster biotechnology drugs it made its name on are beginning to fade. For Celgene and Bristol-Myers, the divestiture will pave the way to one of the pharmaceutical industry’s largest mergers of the past decade.
The price is $11.2 billion once future cash tax benefits are taken into account, Thousand Oaks, Calif.-based Amgen said in a statement Monday. Bristol-Myers also expanded a share-buyback plan to $7 billion, from $5 billion.
Bristol-Myers has a competing psoriasis drug in development, and in June announced its plan to divest Summit, N.J.-based Celgene’s drug Otezla. The psoriasis medication had sales last year of $1.61 billion, and is expected to bring in revenue of $2.71 billion in 2023, according to analysts’ estimates compiled by Bloomberg.
Antitrust authorities have taken an increasing interest in pharmaceutical deals, which have in the past attracted less scrutiny. Along with the U.S. Federal Trade Commission’s scrutiny of the Celgene deal with Bristol-Myers, the agency is also looking at Roche Holding’s planned acquisition of gene therapy company Spark Therapeutics Inc.
Antitrust divestitures can present a chance for acquirers to shop for bargains, since the selling companies need to shed the asset to achieve their larger objectives. But Celgene and Bristol-Myers may have bucked that trend. Earlier this month, Jefferies analyst Michael Yee said that an $8-billion price would be the benchmark for a cheap price. And in July, Mizuho analyst Salim Syed put a $10-billion high-end price on Otezla.
The deal is the largest transaction Amgen has attempted in recent memory. The company had one of the largest cash piles in the industry at the end of 2017, stoking speculation that it might use its hoard to buy smaller biotechnology companies. However, last year Amgen spent $10 billion to buy back its own shares rather than pursue a large deal.
In an interview Monday, Chief Financial Officer David Meline said Amgen had held off on conducting mergers because it viewed potential targets as too expensive.
“It’s been quite some time since we’ve done a transaction as it related to business development,” Meline said. “In part, that’s because prices we’ve seen have been too high.”
Meline and Murdo Gordon, executive vice president of commercial operations, said Otezla fits well into Amgen’s existing research portfolio. The takeover won’t impede Amgen’s ability to pursue other potential takeovers, Meline said.
The deal is contingent on Celgene and Bristol-Myers getting final antitrust approval. Bristol-Myers had previously said it expected the deal to close by the beginning of 2020. On Monday, Bristol-Myers said it now expects the deal to close by the end of this year.
Psoriasis is a disease of the immune system, and causes a sometimes-painful rash when it flares up. An estimated 8 million Americans are affected by psoriasis, according to the National Psoriasis Foundation. Otezla is approved for what’s known as plaque psoriasis, the most common form of the disease, as well as psoriatic arthritis.