Amgen seeks to bolster drug pipeline with $10.4 billion Onyx buy

By Soyoung Kim and Michael Erman

Mon Aug 26, 2013 10:13am BST

n">(Reuters) - Amgen Inc struck a deal to buy cancer drug maker Onyx Pharmaceuticals Inc for about $10.4 billion on Sunday, as it moves to restock its product pipeline in response to declining sales of its flagship anaemia drugs.

The acquisition - which ends a two-month-long auction of Onyx - represents the fifth-largest biotechnology deal in history. It gives Amgen full rights to Kyprolis, the new multiple myeloma drug that analysts expect to reach annual peak sales in excess of $2 billion.

The world's largest biotechnology company will also gain a revenue stream from the liver and kidney cancer drug Nexavar that Onyx shares with Bayer AG, as well as royalty payments on Bayer's much newer colon cancer drug, Stivarga, and potential future royalties on an experimental breast cancer drug being developed by Pfizer Inc.

Thousand Oaks, California-based Amgen has faced growing pressure to beef up its drug development pipeline as safety concerns have trimmed sales of its flagship anaemia drugs, Aranesp and Epogen. Also, patents on four of its five top-selling drugs are set to expire starting in 2015.

Cancer medicines are the holy grail for many drug makers because current products have limited effectiveness and the companies can charge steep prices for new biotech treatments.

Amgen said it will pay $125 per share for Onyx, a 4.2 percent increase from the $120 a share it offered in June. Onyx said that bid significantly undervalued the company and put itself up for sale.

The companies expect the deal to close in the beginning of the fourth quarter. Amgen expects it to add to adjusted net income in 2015.

Discussions between Amgen and Onyx hit a snag earlier this month after Amgen sought access to data from Onyx's ongoing clinical trials, people familiar with the matter told Reuters previously. A source familiar with the matter on Sunday said that Amgen believed it had done extensive due diligence and was comfortable with the purchase.

Onyx shares closed at $116.96 on Friday. They closed at $85.50 on June 28, before reports of Amgen's $120-a-share bid surfaced.

BIGGEST DEAL SINCE 2001

The Onyx deal is Amgen's biggest since its $16 billion acquisition of Immunex in 2001 which gave it the rheumatoid arthritis drug Enbrel, now one of Amgen's biggest-selling products.

It is also by far the biggest deal under CEO Bob Bradway, who assumed the top spot in May 2012. He has done a handful of much smaller deals, the biggest to date being a $1.16 billion acquisition of Micromet.

Large pharmaceutical companies have increasingly been looking to acquire smaller biotech firms to gain access to new drugs, as they face significant revenue losses stemming from expired patents.

This helped drive up the volume of healthcare M&A in the first six months of 2013 more than 30 percent compared with the same period last year.

Recent deals include generic drugmaker Actavis Inc's $8.5 billion acquisition of Warner Chilcott and Human Genome Sciences' $3 billion sale to GlaxoSmithKline Plc.

The Onyx deal is expected to give Amgen a much higher profile in oncology. Several of its current drugs offer supportive care for cancer patients, such as treating anaemia or decreases in white blood cells caused by chemotherapy.

Another of Amgen's newer medicines, Xgeva, helps prevent fractures in patients whose cancer has spread to the bone. It's one product that treats cancer, the colon cancer drug Vectibix, has been largely a disappointment.

Analysts expected Onyx revenue to reach $878 million in 2014, according to Thomson Reuters I/B/E/S.

Mark Schoenebaum, an analyst with ISI Group LLC, projected that an Onyx acquisition would increase Amgen non-GAAP earnings by 5 percent in 2015, and boost them as much as 15 to 20 percent in 2018.

Lazard was the lead financial adviser to Amgen, while Bank of America Merrill Lynch acted as co-adviser and lead arranger for the company's financing. Centerview Partners was Onyx's financial adviser

Law firms Sullivan & Cromwell and Goodwin Procter were legal counsel to Amgen and Onyx, respectively.

(Reporting by Michael Erman and Soyoung Kim in New York; Editing by Matthew Lewis and Stephen Coates)

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Onyx deal expected to give Amgen a big boost

By Susan Kelly

Mon Aug 26, 2013 1:19pm EDT

n">(Reuters) - Investors reacted favorably on Monday to Amgen Inc's $10.4 billion purchase of Onyx Pharmaceuticals Inc, which gives the world's largest biotech company full rights to a blood cancer drug with multibillion-dollar sales potential.

Amgen shares rose 9 percent in midday trade on news of the acquisition, the biggest biotech deal since Gilead Sciences Inc's $11 billion purchase of Pharmasset in 2012.

The main prize in the acquisition is Onyx's blood cancer drug Kyprolis.

Piper Jaffray analyst Ian Somaiya upgraded Amgen shares to "overweight" from "neutral" and raised his price target on the stock to $140 from $120, saying Kyprolis could generate sales of more than $3 billion by 2025.

Brean Capital analyst Gene Mack said Kyprolis and Oprozomib, another blood cancer drug in development at Onyx, could produce combined sales of more than $4 billion.

Kyprolis is used to treat multiple myeloma, the second most commonly diagnosed blood cancer. The disease attacks antibody-producing plasma cells, which are derived from a type of white blood cell. More than 20,000 Americans are expected to be diagnosed with multiple myeloma this year, according to the Leukemia and Lymphoma Society.

Kyprolis competes with the Celgene Corp drug Revlimid. Celgene also has a new myeloma treatment, Pomalyst.

"Given our view of the overall myeloma market and the growth we see over the next 3-5 years, we are not surprised by the interest in Onyx since it is our view that both Onyx and Celgene will be the primary beneficiaries of that growth," Mack said in a note to clients.

Kyprolis has been on the U.S. market for about a year and its sales have been climbing steadily, reaching $61 million in the second quarter. Onyx previously said plans were in place for a Kyprolis launch in Europe in the second half of 2014.

Onyx also sells Nexavar, a treatment for liver and kidney cancer.

Amgen has been looking for new ways to boost its product pipeline as sales of its flagship anemia drugs Aranesp and Epogen have been in decline for years because of usage restrictions and safety concerns.

On a conference call with analysts on Monday, Amgen executives said they plan to file the tender offer for Onyx this week, with the deal expected to close as early as the week of September 30.

Amgen Chief Executive Officer Bob Bradway, who took the helm of the Thousand Oaks, California-based company just over a year ago, has been able to keep investors happy with dividend increases and share repurchases. On the conference call, he said Amgen remained committed to raising its dividend over time after it completes the Onyx acquisition. He also said investors should not expect any significant share repurchases in 2014 or 2015.

In the acquisition, announced on Sunday, Amgen will pay $125 a share for Onyx, a 4.2 percent increase from the $120 a share it offered in June.

Shares of Amgen rose 9 percent to $115.05 in midday trading, while Onyx shares climbed 5.7 percent to $123.65.

(Reporting by Susan Kelly in Chicago; Editing by John Wallace)

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Onyx deal expected to give Amgen a big boost

By Susan Kelly

Mon Aug 26, 2013 1:19pm EDT

n">(Reuters) - Investors reacted favorably on Monday to Amgen Inc's $10.4 billion purchase of Onyx Pharmaceuticals Inc, which gives the world's largest biotech company full rights to a blood cancer drug with multibillion-dollar sales potential.

Amgen shares rose 9 percent in midday trade on news of the acquisition, the biggest biotech deal since Gilead Sciences Inc's $11 billion purchase of Pharmasset in 2012.

The main prize in the acquisition is Onyx's blood cancer drug Kyprolis.

Piper Jaffray analyst Ian Somaiya upgraded Amgen shares to "overweight" from "neutral" and raised his price target on the stock to $140 from $120, saying Kyprolis could generate sales of more than $3 billion by 2025.

Brean Capital analyst Gene Mack said Kyprolis and Oprozomib, another blood cancer drug in development at Onyx, could produce combined sales of more than $4 billion.

Kyprolis is used to treat multiple myeloma, the second most commonly diagnosed blood cancer. The disease attacks antibody-producing plasma cells, which are derived from a type of white blood cell. More than 20,000 Americans are expected to be diagnosed with multiple myeloma this year, according to the Leukemia and Lymphoma Society.

Kyprolis competes with the Celgene Corp drug Revlimid. Celgene also has a new myeloma treatment, Pomalyst.

"Given our view of the overall myeloma market and the growth we see over the next 3-5 years, we are not surprised by the interest in Onyx since it is our view that both Onyx and Celgene will be the primary beneficiaries of that growth," Mack said in a note to clients.

Kyprolis has been on the U.S. market for about a year and its sales have been climbing steadily, reaching $61 million in the second quarter. Onyx previously said plans were in place for a Kyprolis launch in Europe in the second half of 2014.

Onyx also sells Nexavar, a treatment for liver and kidney cancer.

Amgen has been looking for new ways to boost its product pipeline as sales of its flagship anemia drugs Aranesp and Epogen have been in decline for years because of usage restrictions and safety concerns.

On a conference call with analysts on Monday, Amgen executives said they plan to file the tender offer for Onyx this week, with the deal expected to close as early as the week of September 30.

Amgen Chief Executive Officer Bob Bradway, who took the helm of the Thousand Oaks, California-based company just over a year ago, has been able to keep investors happy with dividend increases and share repurchases. On the conference call, he said Amgen remained committed to raising its dividend over time after it completes the Onyx acquisition. He also said investors should not expect any significant share repurchases in 2014 or 2015.

In the acquisition, announced on Sunday, Amgen will pay $125 a share for Onyx, a 4.2 percent increase from the $120 a share it offered in June.

Shares of Amgen rose 9 percent to $115.05 in midday trading, while Onyx shares climbed 5.7 percent to $123.65.

(Reporting by Susan Kelly in Chicago; Editing by John Wallace)

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