THOUSAND OAKS, Calif. (CBS.MW) — Shares of Immunex surged 13 percent Monday after the biotech firm agreed to be acquired by larger rival Amgen in a $16 billion stock and cash deal that represents the largest acquisition ever of one biotech company by another.
The acquisition would give Amgen, the No.1 biotechnology company, control over Immunex’s blockbuster rheumatoid arthritis treatment Enbrel.
The Amgen-Immunex combination is the latest evidence of a consolidation trend that’s reshaping the industry. Biotech firms are linking up at a furious pace in the belief that mergers will translate into bigger product portfolios and lower overhead costs. Like their more established counterparts in the pharmaceutical industry, large biotech firms are now feeling increasing pressure from investors to sustain earnings growth.
Terms of the deal announced Monday call for Immunex
holders to receive 85 percent of the exchange in Amgen stock
and 15 percent in cash, or $4.50 in cash and the rest at a fixed ratio of 0.44 Amgen shares for each Immunex share.
Shares of Immunex jumped $3.44 to $29.06 while Amgen’s stock rose $3.46 to $59.49.
News of the deal sent the overall biotech sector higher Monday with investors wondering who the next buyout target would be. See full story.
With the acquisition, Amgen forecasts its five-year annual percentage growth rate for product sales will reach “the low 30s” from a rate in the low 20s. The company sees the percentage growth rate of its earnings rising to the “mid-20s from the low 20s,” driven by Enbrel sales, which are projected to climb to $3 billion by 2005.
Enbrel, which accounted for 78 percent of Immunex’s total revenue in the third quarter, is expected to post sales of $755 million this year.
During a conference call with analysts Monday morning, Amgen CEO Kevin Sharer said Enbrel will be a major addition to Amgen’s line of products. Amgen’s top-sellers are Epogen, used in the treatment of anemia in patients undergoing kidney dialysis, and Neupogen, used to combat infections in patients undergoing cancer chemotherapy. Amgen also recently won government clearance to sell Aranesp, the successor to Epogen.
“How often do we get a chance to get a proven blockbuster with a long patent life? Enbrel is clearly that,” Sharer said during the call.
Amgen said in a statement that its experience in marketing drugs “will ensure that Enbrel achieves its full blockbuster potential.” In addition to rheumatoid arthritis, the company hopes to win government clearance to sell Enbrel for the treatment of other inflammatory illnesses, such as psoriasis.
Amgen said it expects the acquisition to detract from earnings by “less than 5 percent” in 2003 and then add to earnings in 2004 and subsequent years. Sharer during the call declined to give financial forecasts for 2002, saying there’s too much uncertainty because the companies don’t know exactly when the acquisition will close.
Amgen expects its buyout to close in the second half of next year, but the timetable will depend largely on federal regulators who must OK the transaction.
As part of the agreement, Amgen is set to acquire the 41 percent stake in Immunex held by American Home Products Corp.
American Home, which will get an 8 percent stake in the new company, has agreed to vote for the acquisition, the companies said. The deal still needs approval of Immunex’s other shareholders as well as Amgen’s shareholders.
Shares of American Home edged down 25 cents to $58.60.
Initial reports about the deal late last week met with skepticism from some analysts, who thought that Amgen was paying too much for Immunex. As a result, Amgen’s stock slid, falling 7 percent Friday to close at $56.03. See full story. Shares of Immunex ended at $25.62 Friday after surging late last week as news of the deal leaked out.
Analysts continued to say Monday that the Amgen-Immunex combination will not be without its challenges.
Michael Sjostrom, chief investment officer at Sectoral Asset Management in Montreal, said Amgen’s goal of $3 billion in Enbrel sales is an ambitious one and failure to meet that target could hurt Amgen’s stock.
But Sjostrom did say Enbrel will open up a new market opportunity for Amgen in the field of inflammatory diseases.
“It’s a quantum leap for Amgen,” he said. “The company will be moving into an area in which they had only a marginal presence.”
Aside from being the biggest biotech buyout, the deal also brings together two of the oldest companies in the 25-year-old industry. Thousand Oaks, Calif.-based Amgen opened for business in 1980 and Seattle-based Immunex got its start in 1981.
Some Immunex executives are expected to have a role at Amgen. Peggy Phillips, Immunex’s chief operating officer, will be an executive vice president and Doug Williams, chief technology officer, will be a senior vice president at Amgen, according to the acquisition announcement.
Immunex CEO Ed Fritzky is expected to join Amgen’s board of directors, the companies said.
View more information: https://www.marketwatch.com/story/amgen-to-buy-immunex-in-16-billion-deal