Shares of Amgen Inc. rose Wednesday amid talk that
Johnson & Johnson is interested in acquiring the biotechnology firm in a merger
that would value Amgen at $100 a share - far above Amgen's market price.
But analysts said a merger of the two companies is unlikely and suggested
news Tuesday of eased Medicare reimbursement restrictions for Amgen's red blood
cell booster, Epogen, might be boosting the stock.
At the close, shares of Amgen (AMGN), based in Thousand Oaks, Calif., were
up $4.063, or 6.5%, at $66.75 on volume of just over seven million, nearly
triple the daily average. Shares of Johnson & Johnson (JNJ), meanwhile, were up
$1.188 at $77.563.
Officials from both companies declined to comment, citing corporate policies
of not commenting on speculation or rumors.
Based on about 254.1 million Amgen shares outstanding as of March 31, the
rumored deal would value Amgen at about $25.41 billion.
"I've heard that rumor before," said Bear Stearns & Co. analyst David
Molowa. "Amgen's relationship with J&J historically has been very acrimonious,
so therefore it would be a bit surprising if they were to do anything on a
friendly basis," he said.
Gruntal & Co. analyst David Saks said he has also heard speculation about a
takeover of Amgen, both Wednesday and in the past. The latest talk of a Johnson
& Johnson merger has no merit, Saks said. "I think it's poppycock," he said.
Saks, who puts Amgen's market capitalization at $17 billion, contends it
isn't Johnson & Johnson's style to go after a blockbuster acquisition of this
sort.
Last month, there was talk that DuPont Co. (DD) was eyeing Amgen. Most
analysts downplayed that rumor, however.
Even before May, Amgen Chief Executive Gordon Binder squashed speculation
that a larger pharmaceutical concern might acquire the company. "We believe
Amgen's best course is to remain independent, and we have a very strong
intention of doing that," Binder said in an interview on CNBC.
Still, the rumors persisted - with different suitors emerging as potential
candidates, including Merck & Co. (MRK), one analyst said.
Despite Binder's assertion in April that the company intends to remain
independent, Saks isn't convinced Amgen will remain so. The company is
struggling to repeat the success of its Epogen and Neupogen drugs, Saks said,
and a large pharmaceutical company could provide the research-and-development
budget needed to break into the "big time" drug markets.
In addition to Epogen, Amgen markets Neupogen, used to prevent infection in
cancer patients, and Infergen, aimed at treating chronic hepatitis C.
Earlier Wednesday, Saks upgraded Amgen to "strong buy" from "buy," citing
the Health Care Financing Administration's new rules for Epogen, used by
kidney-dialysis patients. "This puts a positive spin on the Amgen pipeline," he
said.
CIBC Oppenheimer Corp. analyst Matthew Geller noted that Amgen has been
entangled in a legal battle with Johnson & Johnson's Ortho Biotech unit. The
dispute stems from a 1985 product license agreement between the companies.
"It's not clear what J&J would gain from such a takeover," he said. The
relationship between the two companies is strained at best, Geller added. "They
would make uncomfortable bedfellows."
Tuesday, PaineWebber Inc. Elise Wang said the Health Care Financing
Administration reversed a good number of the guideline restrictions previously
placed on reimbursement of Epogen. The new rules allow full reimbursement for
Epogen, which previously was only partially reimbursable. Wang said the
development should spur more usage of the drug. |
