UPDATE 4-Amgen to acquire Abgenix for about $2.2 billion
Wed Dec 14, 2005 08:50 PM ET
(Adds company comment)
By Deena Beasley
LOS ANGELES, Dec 14 (Reuters) - Amgen Inc. (AMGN.O: Quote, Profile, Research) , the world's largest biotechnology company, said on Wednesday that it plans to acquire Abgenix Inc. (ABGX.O: Quote, Profile, Research) for about $2.2 billion in cash, giving it full control of the cancer drug the two are developing.
The news sent shares of both companies higher in after hours trading.
If approved by regulators, the drug, called panitumumab, would be the first cancer treatment from Amgen. The company has billions of dollars in sales of products that treat anemia and other side effects of chemotherapy.
"Panitumumab was the key driver for this transaction," Roger Perlmutter, head of research and development at Amgen, said on a conference call.
Thousand Oaks, California-based Amgen's offer of $22.50 a share represents a 54 percent premium to Abgenix's Nasdaq closing price on Wednesday. Amgen will also acquire the debt of the company.
"This is probably a good deal for Amgen in that folks had been wondering where top-line growth would be coming from in 2007 and this is a good product to have," said Eric Schmidt, an analyst at SG Cowen.
Abgenix, based in Fremont, California, has used its technology for genetically engineering mice to generate human antibodies and build a portfolio of antibody drugs.
Schmidt said he thinks there is a better than 90 percent chance panitumumab will be approved by regulators.
The drug, given intravenously, is a monoclonal antibody which works by blocking a protein called epidermal growth factor that helps tumors grow.
It would compete with similar drugs such as ImClone Inc.'s (IMCL.O: Quote, Profile, Research) Erbitux.
Amgen said last month that panitumumab was shown to slow tumor growth by a better-than-expected 46 percent in patients with advanced colon cancer who did not respond to chemotherapy.
Perlmutter said the drug's biggest market is likely to come from patients with earlier-stage cancer.
Amgen expects early data from a study of panitumumab in combination with Genentech Inc.'s (DNA.N: Quote, Profile, Research) Avastin and chemotherapy in these colon cancer patients before the end of the year.
Perlmutter said the drug will also be studied against a range of other solid cancer tumors.
Amgen, which plans to begin a U.S. Food and Drug Administration application for panitumumab this week, estimated potential peak worldwide sales for the drug at $2 billion or more, based just on eventual approval in colon cancer as well as head and neck cancer.
That estimate "may be a bit of a stretch," said Brian Rye, an analyst at Janney Montgomery Scott. He said the transaction is favorable for Abgenix and allows Amgen to maximize commercial opportunities while removing royalty obligations.
Amgen said it expects the deal to reduce its adjusted earnings per share in 2006 and 2007 by 5 cents to 10 cents, and to add to earnings thereafter, assuming panitumumab's success.
Amgen Chief Financial Officer Richard Nanula said the forecast includes some 2006 revenue from panitumumab, indicating that Amgen expects regulatory approval next year.
Rye said the $22.50 per share bid "exceeds what we had thought was a fair value at this time," but said Amgen is planning a number of studies that can potentially expand the market opportunities for panitumumab.
Amgen Chief Executive Kevin Sharer said the deal gives the company full ownership of panitumumab and eliminates a royalty obligation for denosumab.
Denosumab, another antibody-based drug, was discovered by Abgenix and is being developed by Amgen as a treatment for osteoporosis.
The acquisition, subject to approvals from Abgenix shareholders and regulators, is expected to close by the end of the first quarter of 2006.
The transaction includes the Abgenix manufacturing plant in Fremont, which will produce panitumumab. Amgen said it will retain Abgenix employees at the plant, and will be reviewing that status of other employees.
Shares of Abgenix, which closed at $14.65 on Nasdaq, were 50 percent higher at $21.93 in after hours trading, while shares of Amgen, which closed at $76.78, were 3.3 percent higher at $79.35.
Shares of ImClone were 4.1 percent lower at $31.42 in after-hours trading after closing at $32.78 on Nasdaq. (Additional reporting by Bill Berkrot in New York and Toni Clarke in Boston)
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