In The News

Bristol-Myers to Acquire Amylin for $5.3 Billion

July 3, 2012  |  Bristol-Myers Amylin Pharmaceuticals West Chester Ohio
Amylin Pharmaceuticals

By Shannon Pettypiece and Meg Tirrell

Business Week

July 02, 2012

Bristol-Myers Squibb Co.’s $5.3 billion deal to buy diabetes drugmaker Amylin Pharmaceuticals Inc. (AMLN) (AMLN) gives Bristol (BMY) (BMY) immediate access to a market of growing medical need, while heralding a burgeoning hunger among pharmaceutical companies for acquisitions.

The agreement is the second announced this year for Bristol, and the largest for the industry. It comes after the blood-thinner Plavix, Bristol’s top seller in 2011 at $7.1 billion, faced generic competition for the first time in May.

Drugmakers last year lost patent protection on products valued at $34 billion in annual sales, an amount that will rise to $147 billion by 2015, according to data compiled by Bloomberg. The Bristol deal would be the fifth sealed in 2012 for more than $1 billion, more than the three in each of the previous two years. More deals like this one are coming, said Seamus Fernandez, of Leerink Swann & Co.

“We are on the cusp of the next consolidation wave,” said Fernandez, a Boston-based industry analyst, by telephone. “There just isn’t enough top-line growth in the industry.”

AstraZeneca, Pfizer

Last year, drugmakers “took a little bit of a pause,” he said. “Now, I think we are going to see a reacceleration in that number.” Fernandez identified London-based AstraZeneca Plc (AZN), New York-based Pfizer Inc. (PFE) (PFE) and Merck (MRK) (MRK) & Co., of Whitehouse Station, New Jersey, as possible acquirers during the year ahead.

“AstraZeneca and Pfizer have pretty much been out of the market,” he said. “We should anticipate they will be back. I wouldn’t be surprised with some of the spin outs to see more large acquisitions being considered.”

Bristol said on June 29 that it agreed to buy San Diego- based Amylin for $31 a share in cash, a 10 percent premium to the June 29 closing price. The New York-based drugmaker also announced it will be paid $3.4 billion by AstraZeneca to help develop Amylin’s drug pipeline.

Amylin rose 8.9 percent to $30.71 at the close of New York trading. The stock was at $15.39 on March 27, the day before it was reported Bristol had made an unsolicited offer of $22 a share. Bristol gained less than 1 percent to $36.05.

The AstraZeneca partnership means the companies will share both the risk and the reward of potential treatments.

Going to Fail

“Drugmakers say they would do more deals, but the issue with biotech companies is that most of the drugs they’re developing are going to fail,” said Mark Schoenebaum, an analyst at ISI Group in New York, by telephone. “So the biggest issue isn’t the willingness to do a deal, or the appetite to do deals, but rather finding stuff that’s worth buying.

“When you have good assets coming along you’ll see deals,” Schoenebaum said.

Amylin offered Bristol two products already approved for sale by U.S. regulators -- the twice-daily diabetes injection Byetta, which generated $518 million in 2011, and a longer- acting form of that drug, called Bydureon, that’s taken just once a week.

“We believe this is a very strategic transaction for Bristol Myers Squibb,” said Bristol Chief Executive Officer Lamberto Andreotti in a conference call with investors. “It will enhance our already strong diabetes portfolio, something that is very important in light of the significant unmet medical need.”

Creating Value

If the easier-to-use Bydureon becomes a $2 billion product, “it will create value” for shareholders, Schoenebaum said. “We saw a lot of interest in Amylin because it’s diabetes and there aren’t a lot of diabetes assets out there. It is increasingly strategic to be in that market.”

Bristol’s own experimental diabetes product, dapagliflozin, failed to win U.S. marketing approval in January, when the Food and Drug Administration asked for more data to assess its risks and benefits. The treatment, being developed jointly with AstraZeneca, is approved in Europe.

Diabetes has become a key target for pharmaceutical companies as a result of rising obesity rates and the aging of the Baby Boom generation. About 346 million people globally have the illness, and the number of deaths may double from 2005 to 2030, according to the World Health Organization.

AstraZeneca, Paris-based Sanofi (SAN) and Merck also made offers during a bidding process, people with knowledge of the process had said.

Marketing Partnership

Amylin ended a marketing partnership on Bydureon and Byetta with Indianapolis-based Eli Lilly & Co. (LLY) (LLY) in November, and had been seeking a partner to sell the medicine outside the U.S. The company began to seek acquisition suitors after rejecting a $22- a-share offer from Bristol in February, people familiar with the matter said earlier this year.

For Bristol, the purchase is the largest of 19 since 2007, when it began its so-called string of pearls acquisition strategy designed to revitalize the company in the face of patent losses and produce a more diverse stable of products.

This year, there have been four announced acquisitions of biotechs for more than $1 billion, and one takeover attempt that’s still active, according to data compiled by Bloomberg.

GlaxoSmithKline Plc’s $2.6 billion hostile offer for Human Genome Sciences Inc. is still pending. The two companies have a partnership on the approved lupus drug Benlysta, as well as experimental medicines for diabetes and cardiovascular disease.

Bristol purchased Inhibitex in January for $2.5 billion to gain access to experimental hepatitis C medicines, while Agilent Technologies Inc. bought Danish cancer-diagnostics maker Dako for $2.2 billion to expand its life-science business.

AstraZeneca took over Ardea Biosciences Inc. for $1.26 billion in April, adding experimental drugs for gout and cancer.

Amylin was advised by Goldman Sachs & Co. and Credit Suisse Securities LLC. Citigroup Inc. and Evercore Partners Inc. (EVR) (EVR) are serving as financial advisers to Bristol. Bank of America Merrill Lynch advised AstraZeneca.

To contact the reporters on this story: Meg Tirrell in New York at mtirrell@bloomberg.net; Ryan Flinn in San Francisco at rflinn@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net