Amgen and Onyx finally seal an acquisition deal

THOUSAND OAKS & SOUTH SAN FRANCISCO, Calif.—AmgenInc. got a nearly 8-percent boost on its stock prices at Monday's market closeafter the Aug. 25 announcement that ithad reached an agreement to acquire Onyx Pharmaceuticals Inc. for $125 pershare, which comes out to about $10.4 billion, or $9.7 billion net of estimatedOnyx cash.

This followed some tension in the previous week,when it was reported early in the week, via information from unnamed sourcesclose to the deal, that Onyx's unwillingness to release early trial data resultsfor its European approval of blood cancer drug Kyprolis werecausing Amgen to balk at continuing with acquisition talks at a point whenthey had supposedly reached a potential target of $130 per share. Then cameanonymously released news from insiders on Friday that Amgen was pushing for alower price after Onyx failed to release the data and, that same day, more newsleaking that Onyx had finally released the data—to Amgen and all other partiesinterested in acquiring Onyx.

That $130 price tag obviously was not reached, forwhatever reason, but it is higher than the $120 per share originally offeredabout two months earlier, whichOnyx refused and said "significantly undervalued Onyx and its prospects."After that, Pfizer is said to have dropped out of the running because the pricewas too high for it, and analysts began speculating that a suitor—whether Amgenor someone else—might go as high as $180 per share. By that time, Amgen andOnyx were saying almost nothing to the media, at least officially, about whatthey were saying to each other, and the most significant news out of eithercompany until Sunday, Aug. 25 was Onyx saying that Amgenwasn't alone in wooing the company and that it didn't have a lock on theacquisition.

Now, we're at the point where Amgen is ready toseal the deal and the boards of both companies have agreed to an acquisitionthat should close at the beginning of the fourth quarter, subject to thesatisfaction of customary closing conditions, including the receipt ofregulatory clearance.

"Amgen has a unique opportunity to add value toKyprolis, a product which is at an early and promising stage of its launch,"noted Robert A. Bradway, chairman and CEO of Amgen, who also said, "Amgen isideally suited to realize the full potential of Onyx's portfolio and pipelinefor the benefit of physicians and patients. Our acquisition of Onyx follows athorough due diligence process and is fully consistent with our strategy ofadvancing innovative medicines that address serious unmet medical needs. Weexpect this acquisition will accelerate growth and enhance value for Amgenshareholders.

As the companies both noted in the news releaseabout the finalization of their agreement, Onyx has "an important and growingmultiple myeloma franchise," with Kyprolis (carfilzomib) for injection alreadyapproved in the United States and undergoing clinical trials for approval inEurope. In addition, Onyx has three partnered oncology assets: Nexavar(sorafenib) tablets with Bayer HealthCare, Stivarga (regorafenib) tablets withBayer compound and palbociclib with Pfizer Inc. compound. Onyx also hasmultiple other oncology compounds in various stages of clinical development.

As for the most recent potential oncology gem, Onyxholds global rights to Kyprolis, excluding Japan, and Kyprolis has an orphandrug designation in the United States with exclusivity until July 2019, and U.S.patents which extend until at least 2025.

"Kyprolis, currently marketed in the U.S., isalready off to a solid start and represents significant commercial potential.It has orphan drug status in the U.S. until July 2019 and is currently inseveral studies including the ASPIRE (interim analysis in 2014) and FOCUS (datain 2014)," wrote Zacks Investment Research in a bullish research note. "Resultsfrom these studies would support EU filing. Kyprolis sales were about $125million in the first half of 2013. Sales should be driven by launch inadditional countries and expansion into additional indications."

With this acquisition, Amgen will be strengtheningits presence in the oncology market, Zacks points out, and Onyx's marketedproducts thus far cover relapsed and refractory multiple myeloma, liver andkidney cancer, metastatic colorectal cancer and metastatic gastrointestinalstromal tumors. Advanced pipeline candidates and pending approvals also includedrugs for advanced breast cancer, multiple myeloma and thyroid cancer.

"With key products in Amgen's portfolio slated tolose exclusivity in the coming years, contributions from Onyx Pharma's productsshould help make up for a part of the revenues that will be lost to genericcompetition," Zacks notes, "We are positive on this deal which makes strategicsense."

Other market watchers were also generally upbeatabout the deal. Piper Jaffray upgraded Amgen shares to "overweight"from "neutral" and suggested Kyprolis could generate sales of morethan $3 billion by 2025, while Brean Capital, looking at the combined value ofKyprolis and another blood cancer drug, Oprozomib, sees combined sales of morethan $4 billion.