Amgen on the hunt for potential $10bn deal
Amgen, one of the four largest US biotech groups, is on the hunt for potential acquisitions, according to people familiar with the situation, as it prepares to end its self-imposed exile from the boom in pharmaceuticals mergers and acquisitions.
More than $850bn of healthcare deals have been announced since the start of 2014, according to Thomson Reuters, but Amgen has so far stayed on the sidelines, eschewing large or medium-sized transactions.
Instead, it has focused its efforts on buying or licensing a handful of unproven drugs that are in early-stage testing and typically command much smaller price tags.
However, a person familiar with the company’s thinking said it had recently “opened the aperture” and was now evaluating companies worth in the region of $10bn, with drugs that have been proven in clinical testing and are almost ready to bring to market.
Companies that have recently completed similar acquisitions include Celgene, another biotech group, which paid $7.2bn for cancer specialist Receptos, and Alexion, which spent $8.4 on Synageva, a rare diseases specialist.
Amgen, which ended last week with an equity value of $121bn, has also been seen as a potential target and has been linked to Allergan, the drugmaker that is in talks about combining with Pfizer.
$121bn
Amgen’s market value on Friday
One investor who recently held meetings with Amgen’s management team said the company had contacted shareholders in the past few weeks to get “everybody prepared” for an acquisition.
Amgen declined to comment.
Amgen’s last major acquisition was Onyx, which it bought in 2013 for roughly $10bn, primarily to secure the rights to its cancer drug Kyprolis.
Investors initially turned sour on the Onyx deal amid lacklustre sales of the medicine, but many shareholders revised their opinion this year, after the US drugs watchdog approved Kyprolis for use in a cocktail of medicines to treat patients with cancer of the plasma cells.
The decision by the Food and Drug Administration paves the way for a big jump in sales, according to analysts.
“They’re taking a lot of comfort from the Onyx acquisition,” the investor said.
Amgen would probably finance an acquisition by raising debt, according to the person familiar with the company’s thinking.
Although the company’s balance sheet has $30bn of debt it also has roughly the same amount in cash, with the vast majority trapped offshore. Repatriating cash to the US to fund a deal would incur a hefty tax bill.
Amgen, founded in 1980, is one of the four cornerstone groups of the US biotech sector, along with Celgene, Gilead and Biogen, and is credited with developing some of the first successful “biologic” drugs.
It is now facing competition to some of its top-selling products from a new generation of “biosimilar” copycat medicines. Earlier this year, the FDA approved the first ever biosimilar version of Neupogen, an Amgen medicine that had sales of $1.16bn last year.
Last year, Dan Loeb, the activist investor, acquired a stake in Amgen through his Third Point vehicle and pushed for cost-cutting and a potential break-up of the company, prompting the group to implement roughly $1.5bn of cuts.
However, Amgen has fiercely resisted any attempt to split in two, and Mr Loeb has, for now, dropped the idea.