BMS to buy Kosan for $190M

BMS enhances cancer portfolio in two important anti-cancer classes

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PRINCETON, N.J.—Looking to bolster its oncology portfolio, Bristol-Myers Squibb Co. announced in late May it would acquire Kosan Biotechnologies Inc. for $5.50 per share, or a net aggregate purchase price of roughly $190 million. Through this deal, BMS gets access to Kosan's two classes of promising anticancer agents, novel Hsp90 (heat shock protein 90) inhibitors and epothilones.

The deal represents a premium of nearly 230 percent to the $1.65 per share trading price of Kosan stock the day prior to the deal, and indicates that BMS executives had a much different view of the value of the company than the broader investment community.

"We pursue innovative science, both internally and externally, that can accelerate the discovery and development of new medicines. Kosan's technology, coupled with our development and commercialization capabilities, will result in new treatment options for patients, and represents another important milestone in the execution of our strategy to become a next-generation BioPharma leader," said Jim Cornelius, chairman and CEO of BMS, in a statement announcing the deal.

For Kosan, the deal comes on the heels of what has been a rather tumultuous year. Trading as high as $6.41 per share last June, the company's value was nearly quartered over the ensuing twelve months.

In that time the company reacquired its epothilone program by ending a development and commercialization pact with Swiss drug company Roche; replaced its former CEO Robert Johnson in February with Helen S. Kim, who had been brought on board only two months prior as chief business officer; and announced plans in March to slash its workforce by 37 percent as it looked to refine its focus on its most promising drug candidates.

The deal with BMS will provide the resources to pursue further development of its Hsp90 inhibitor KOS-953 currently in Phase II clinical trials for both multiple myeloma (in combination with Velcade) and in HER2+ metastatic breast cancer and for its epothilone candidate for the treatment of solid tumors KOS-1584 which just recently entered Phase II trials.

 "Bristol-Myers Squibb has the experience, know-how and global development and commercialization capabilities to turn our programs into successfully developed products in the market and to do so in a manner that far exceeds what Kosan could achieve on our own," says Kim.

According to Kosan officials, the deal with BMS evolved from an exploration of partnering opportunities it began seeking out earlier this year for its epothilone program. Concurrent with the merger announcement, Kosan also revealed it inked a separate license agreement under which Kosan granted to Bristol-Myers Squibb an exclusive worldwide license to Kosan's epothilone compounds and related intellectual property and data and will assign to Bristol-Myers Squibb its epothilone investigational new drug applications. Under the license agreement, Kosan will receive an initial payment of $25 million and is entitled to milestone payments in connection with the development of epothilone product candidates and royalty payments on net sales of such products.
According to Gary Titus, Kosan CFO, the deal would only take affect should the larger deal with BMS not go through.

"The license agreement is effectively what I would consider a back up for the merger agreement," Titus says. "In the event the merger agreement is not consummated, then the terms of the license agreement will be implemented including the [up front] payment. It is an effective way for Kosan to ensure that we would have a licensing agreement [in place] though it is not our desire to ever use this license agreement." DDN 

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