Amgen is on the lookout for an Onyx-sized M&A deal

After largely sitting tight since its 2013 Onyx acquisition and staying on the M&A sidelines, Amgen is said to be hunting for a biotech buy in the vicinity of $10 billion

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THOUSAND OAKS, Calif.—If there’s one thing you can count on when a big company is quietly pursuing a major merger and acquisition (M&A) deal—whether as the buyer or looking to be bought—it’s that someone will speak on condition of anonymity with the likes of the Financial Times (FT) and the Wall Street Journal.
Given that even these loose-lipped sources “close to the matter” often don’t provide much in the way of precise details, it often feels like a purposeful attempt to build up buzz or test the waters of market response rather than some people giving up information behind their boss’ backs. Whether that’s the case or not this time, FT has reported that biotech giant Amgen has an Onyx-sized hole in its heart, so to speak.
No, not the semi-precious stone; rather, we’re referring to the $10-billion M&A deal in 2013 that Amgen made to gain the biopharma Onyx Pharmaceuticals and its multiple myeloma treatment Kyprolis (carfilzomib). Since that time, Amgen hasn’t been active on the M&A front, despite the flurry of activity around M&As generally—instead, the company has stuck to buying or licensing early-stage development drugs. Now the source close to the matter has told FT that Amgen has “opened the aperture” on the subject of M&As and is looking for something in the $10-billion range again, or close to it.
That number itself has a competitive and chest-thumping feel about it, in part because—as noted recently of the news—that’s in the same ballpark as Celgene's $7.2 billion deal for Receptos.
Also, it may be a reminder to investors not to second-guess or underestimate Amgen on a deal that size.
You see, part of the reason Amgen has been quiet until now is likely the criticism and doubts that followed the $10-billion Onyx acquisition. Kyprolis delivered disappointing sales, leading some market-watchers to cry that the deal had no shareholder value and to call for a business split to provide greater value. Amgen stood fast, though, and managed to increase dividend payout by 30 percent and announced a large share repurchase plan that started at $2 billion and grew to $5 billion. In a third-quarter earnings report recently, the company boosted its 2016 dividend another 27 percent.
Moreover, Kyprolis managed a 46-percent year-over-year and 15-percent sequential increase in sales in the third quarter and gained expanded approval as a first-line treatment of multiple myeloma earlier this year—more new indications are expected on the horizon as the drug positions itself as a best-in-class prednisone inhibitor.
Adding to the pressure to do a big M&A deal and bolster Amgen’s pipeline would be some major patent cliffs—Amgen’s blockbuster products are all facing or about to face biosimilar competition. Early March saw U.S. approval of the nation’s first biosimilar, which competes with Amgen’s cancer drug Neupogen. Amgen’s Neulasta, which fights cancer chemotherapy-induced neutropenia, lost its U.S. patent protection in October and will lose it in Europe in 2017. Back in 2014, Epogen—which treats anemia caused by chronic kidney disease in patients on dialysis, so as to reduce or avoid the need for red blood cell transfusions—lost patent protection and it expected to see a decline in sales going forward after posting sales of $2 billion last year.
So, what company might Amgen make a play for in this M&A hunt? No one knows yet, as the source close to the matter is shy about sharing that information, but Hannah Ishmael at had some speculatory input, saying that among oncology-oriented acquisition targets, a prime candidate may be Seattle Genetics Inc. and its product Adcetris, an anti-CD30 monoclonal antibody. Also, she writes, Alnylam Pharmaceuticals Inc. and its RNA interference platform could be attractive, as could Dr. Reddy’s Laboratories Ltd. with its role as the No. 2 maker of generics and focus on gastrointestinal diseases, cardiovascular diseases, pain management, cancer, dermatology and pediatrics or perhaps Africa’s biggest drug-maker, Aspen Pharmacare HLD.

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