This is from Ende at Merrill. I don't think he thinks ABGX shareholders got a great deal.
Company Update; Amgen Shows Confidence in P-MAb; Buys
ABGX
Amgen Shows Confidence in P-MAb; Buys ABGX
Amgen showed increased confidence in panitumumab (p-MAb) for cancer &
denosumab for osteoporosis by announcing it is acquiring Abgenix for $2.2 B in
cash and the assumption of $450 MM of debt. The deal eliminates payments to
ABGX for 50% of the operating profits of p-MAb and a 5% royalty on denosumab
sales. Also, it provides a 100,000 L manufacturing plant and NOLs/tax credits,
which will reduce future cash outlays. The deal is expected to be modestly
dilutive in ‘06 & ’07 but accretive thereafter, increasing Amgen’s long-term
growth.
INCREASED CONFIDENCE IN p-MAb POTENTIAL:
Amgen projects p-MAb sales of $2 B. Prior to pivotal data on p-MAb, Amgen
was cautious regarding prospects of the drug. But, after getting the data, Amgen
has shown increased confidence in p-MAb’s potential for 1st, 2nd, 3rd line and
adjuvant colorectal cancer (CRC) as well as head & neck cancer. Based on better
safety, more convenient dosing, a lower price, and bundling with Amgen’s other
cancer drugs, we expect p-MAb to dominate the market vs. Erbitux.
DEAL PRODUCES SIGNIFICANT CASH SAVINGS:
Amgen will no longer have to pay Abgenix 50% of the worldwide operating
profits from p-MAb nor a 5% royalty on denosumab, saving the company billions
of dollars over the life of the drugs. In addition, Amgen will not have to build
another manufacturing plant saving $400 MM over 4 -5 years and gains tax
credits/NOLs of another $300 MM over 10 years.
DILUTIVE IN NEAR-TERM BUT ACCRETIVE BY ‘08:
Due to operating expenses from Abgenix, which will not be significantly offset by
royalty expense savings in the near-term, we expect the acquisition to be dilutive
by $0.09 in ‘06 and $0.05 in ’07. But, the deal should be accretive by $0.01 in
’08, $0.07 in ’09, and |
