Here's just about the most cogent explanation I've yet read regarding the why behind this merger. It comes from a poster on the Yahoo thread:
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Breaking News
15:45 EST Friday
Analysts speculate AHP is driving possible Immunex sale
Joel Ozretich
The reported deal to sell Seattle-based Immunex Corp. to Amgen Inc. for about $17 billion in stock and cash appears to be driven by the needs of Immunex's largest shareholder, American Home Products, analysts said. AHP, a pharmaceutical company based in Madison, N.J., owns 41 percent of Immunex. It faces billions of dollars in payments to settle claims from people who took the diet-drug combination fen-phen, and analysts said that may be the reason for the sale. "I'd always thought that American Home Products would prevent an outside suitor from jumping in and taking over" Immunex, said Paul Latta, biotechnology analyst at Seattle-based McAdams, Wright, Ragen Inc. But now, he said, "It appears that this whole thing is being motivated by American Home Products."
The sale may be a blow to Seattle's biotech industry, Latta added. "(Immunex) is kind of carrying the torch for local biotech companies. It's a bellwether for the local biotech industry and has a fairly stable employment base," Latta said. "It may be the best thing for shareholders, but I'm not certain that without the fen-phen lawsuit the deal would have been pursued as assertively. It looks like seattle is paying for American Home Products' mistake."
Negotiations between Immunex and Amgen, the world's most successful biotechnology company, were first reported Thursday. Neither company would confirm the talks, but reports said a deal could be announced as soon as Monday.
"Just from the way the market is reacting, I would guess that definitely they are talking," said Andrew Heyward, an analyst at Seattle investment firm Ragen MacKenzie Inc. "I put the odds of something like this happening at 50/50."
Heyward noted that Immunex has been looking to purchase another biotech or pharmaceutical company with a late-stage drug candidate for more than a year - and has been unsuccessful.
American Home Products has been hit with huge legal costs over the last several years from lawsuits related to its former weight loss drug, fenfluramine, which was half of the diet drug combination known as fen-phen. In October 1999 AHP agreed to pay $3.75 billion to settle a lawsuit brought by thousands of people who took the fen-phen combination. Latta speculated that AHP's share of a sale, about $7 billion if reports of the deal are accurate, could help pay some of its legal costs.
In the short term, both analysts agreed, the sale would reduce the value of shares held by Amgen stockholders. But it could pay off over time as sales and production of Immunex's leading drug, Enbrel, increase. Immunex reported profits of $128 million on $709 million in revenues for the first nine months of this year. Latta projects the company will end fiscal year 2002 with about $165 million in profits. "In the short term, Amgen stock would be diluted," Latta said. "$17 billion is a lot to pay compared to $165 million" in profits from Immunex. Immunex shareholders, on the other hand, could benefit. Amgen reported $1.1 billion in profits on sales of $3.4 billion in 2000. "Amgen is a very high quality biotechnology company. It's kind of the granddaddy of biotechs," Latta said. "If Immunex shareholders end up with shares of Amgen, it's a good company to own."
Copyright 2001 American City Business Journals Inc.
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It makes a certain kind of sense. From my point of view I own a large, core, position in IMNX established off its lows. I feel IMNX can make it on its own given all we know about its future plans. So hooray for me if the deal doesn't go through. However, given the "intrusion" of AMGN and it's subsequent market angst driven meltdown I've also establish an initial "nibble" of a core position in them at ~$56.19. Either the deal fails and AMGN rebounds toot sweet by $10, in which case hooray for me! Or the deal goes through and AMGN, over the short haul, retreats further or waffles around sideways in which case I add to my initial nibble and 1 year from now it rebounds from all this resulting in the same thing....hooray for me!
I love these win/win situations... Uhhh...'course....I could be wrong about this, so all of the above imho, of course!
John~ |
