Amgen to acquire deCODE genetics for $415 million

THOUSAND OAKS, Calif.—Amgen Inc. has announced that it had entered into a definitive agreement underwhich it will acquire Reykjavik, Iceland-based deCODE genetics in an all-cash transaction that values deCODEat $415 million.

The deal was unanimously approved by Amgen's board and is expected to close by the end of this year since, while there are customary closing adjustments yet to consider, the acquisition reportedly doesn't require any regulatory approval.

Closely held deCODE, which hunts for genes that are the cause of disease, has had a rocky ride since its founding in 1996. There was much excitement and promise around the company initially, in part because of hype around genomics—the Human Genome Project in particular—but also because the Icelandic company was focused on its own country's unique genetic heritage, which has changed very little for centuries. As such, it was assumed that it would be easier to tease out links between gene variants and common diseases.

The company went public in 2000, and at one point its valuation peaked at around $1 billion. But after failing to ever show a profit and saddled with huge debt, deCODE filed for bankruptcy in 2009. It emerged from bankruptcy in 2010 as a private company whose owners included private equity firms Polaris Venture Partners and ARCH Venture Partners LP—who bought the company at a bargain price of $14 million.

Just a couple year later, that investment is paying off with Amgen ready to pony up well over $400 million, and some market-watchers have wondered whether it's worth the price, as it remains unclear whether Amgen can tap the potential that many have seen in deCODE over the years and not only identify genetic variants liked to various disease and disorders but also direct that knowledge toward effective treatment of those defective genes.

Whether buoyed by the recent approval of the first-ever genetic therapy in Europe—which was preceded by the first-ever approved gene therapy in China several years ago—or by some other instinct, insight or hope, Amgen is expressing optimism.

Robert A.Bradway, president and CEO of Amgen, noted that

"deCODE genetics has built a world-classcapability in the study of the genetics of human disease. This capability will enhance ourefforts to identify and validate human disease targets. This fits perfectlywith our objective to pursue rapid development of relevant molecules that reachthe right disease targets while avoiding investments in programs based on lesswell-validated targets."

"One of the ways to truly realize the fullvalue of human genetics, is to make our research synergistic with drugdevelopment efforts where target discovery, validation and prioritizationefforts can be accelerated," said Dr. Kari Stefansson, founderand CEO of deCODE Genetics. "We believe Amgen's focus and ability toincorporate our genetic research into their research and development efforts willtranslate our discoveries into meaningful therapies for patients."

As noted at the website Seeking Alpha, this isn't the first time this year Amgen has put up big dollars for an acquisition, so optimism is probably a must despite deCODE's unprofitable history.

"Amgen has opened its wallet in a big way in2012, starting the year with the $1.2 billion purchase of Micromet, while alsocommitting up to $1 billion for BioVex and $315 million for KAIPharmaceuticals," Seeking Alpha noted Dec. 10 when the acquisition was announced, and likened the acquisition to shopping from the biotech scrap heap. As Seeking Alpha points out, "it remains to be seen whether Amgen can find thekey to unlock the value that many have seen in deCODE's approach for more thana decade."

Seeking Alpha did acknowledge that deCODE and its know-how could be very useful for lead generation and basic science efforts at Amgen, but expressed doubt that there would be any visible pipeline gains for the company for a decade or more.