Bristol-Myers to Acquire Amylin for $5.3 Billion

Bristol-Myers to Acquire Amylin for $5.3 Billion

By Meg Tirrell, Ryan Flinn and Jeffrey McCracken on July 01, 2012
Bristol-Myers (BMY) (BMY) Squibb Co., which failed to get U.S. approval for a new diabetes treatment in January, will pay $5.3 billion for Amylin Pharmaceuticals Inc. (AMLN) (AMLN), the maker of two drugs on the market for the disease.



The purchase comes a month after Bristol’s top seller, the blood-thinner Plavix with $7.1 billion in sales last year, began facing generic competition. In 2013, the New York-based company loses patent protection on its $1.6 billion HIV drug, Sustiva.

Under the agreement announced yesterday, Bristol-Myers will pay $31 a share in cash, a 10 percent premium to the June 29 closing price for San Diego-based Amylin. At the same time, AstraZeneca Plc (AZN), based in London, will pay Bristol $3.4 billion to help develop Amylin’s drug portfolio, the companies said.

It “looks a bit rich in terms of the price paid and it’s a trend in the sector, where biotech companies are commanding significant premiums, higher than they would have commanded in previous years because the pharmaceutical sector is being forced down this road,” said Navid Malik, an analyst with Cenkos Securities Plc (CNKS) in London.

The pharmaceutical industry lost patent protection on products valued at $34 billion in annual sales last year, and revenue at risk from generics will rise to $147 billion by 2015, according to data compiled by Bloomberg.

The diabetes market has become a key target for drugmakers as a result of rising obesity rates and the aging of the Baby Boom generation. About 346 million people globally have diabetes, and the number of deaths from the chronic disease may double from 2005 to 2030, according to the World Health Organization.

Other Offers
AstraZeneca, Paris-based Sanofi (SAN) and Merck & Co. (MRK) (MRK), of Whitehouse Station, New Jersey, also made offers during a bidding process, people with knowledge of the process had said.

Amylin ended a marketing deal with Indianapolis-based Eli Lilly & Co. in November, and has been seeking a partner to sell Bydureon, a version of its diabetes drug Byetta, outside the U.S. The San Diego-based 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.

Revenue at Amylin surpassed $650 million last year and may rise about 5 percent in 2012, according to analysts’ estimates (AMLN) compiled by Bloomberg. The company may generate (AMLN) as much as $1.5 billion in annual sales from Byetta and Bydureon, Phil Nadeau, a Cowen & Co. analyst in New York, wrote earlier this year.

For Bristol, the purchase is the largest of 19 since 2007, when it began 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.

Forxiga
Bristol-Myers’s own experimental diabetes product, dapagliflozin, also called Forxiga, failed to win U.S. marketing approval in January, when the Food and Drug Administration asked for more data to assess risks and benefits for the treatment, being developed with AstraZeneca. It’s awaiting approval in Europe, and may be cleared later in the U.S.

The boards of Bristol-Myers and Amylin endorsed the deal, according to yesterday’s statement. Including Amylin’s debt and a payment owed to Eli Lilly & Co. (LLY) (LLY) of about $1.7 billion, the deal is valued at about $7 billion.

“We are pleased to be able to strengthen the portfolio we have built to help patients with diabetes by building on the success Amylin has had with its GLP-1 franchise,” Bristol-Myers Chief Executive Officer Lamberto Andreotti said in the statement.

Bristol-Myers and AstraZeneca will equally share profits and losses in the venture to develop Amylin’s drug portfolio.

Diabetes Alliance
“There will be an expansion of a diabetes alliance we have had with AstraZeneca,” Jennifer Fron Mauer, a spokeswoman for Bristol, said in a telephone interview. “We’ve had that since 2007 to co-develop and co-commercialize two Type II diabetes medicines in our pipeline.”

AstraZeneca, whose CEO David Brennan retired June 1, was thought to make most sense as a potential acquirer of Amylin, according to Michael King, an analyst at Rodman & Renshaw in New York. The company’s Seroquel medicine lost patent protection in March, and analysts expect the antipsychotic drug’s sales to drop to $3.27 billion this year from $5.82 billion last year, according to data compiled by Bloomberg.

Carl Icahn, the billionaire investor who is Amylin’s third- largest shareholder with a stake of almost 9 percent as of April 4, threatened a proxy fight in April and urged a sale, calling the company’s board “dysfunctional” and “not operating in a manner that enhances shareholder value.”

Amylin rose less than 1 percent to $28.20 in New York trading on June 29. The San Diego-based company’s shares were at $15.88 on March 26, the day before it was reported Bristol-Myers had made an unsolicited offer of $22 a share. Bristol-Myers gained 2.5 percent on June 29 to close at $35.95.

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 Myers. Bank of America Merrill Lynch advised AstraZeneca.