Amgen, the world's largest biotechnology company, will acquire drug development partner Abgenix for $2.2 billion, allowing Amgen to acquire a promising experimental cancer drug that may spell trouble for Bristol-Myers Squibb's (BMS) and ImClone's competing drug Erbitux.
Amgen will pay $22.50 a share for Abgenix, a biotechnology firm that specializes in creating antibody drugs the human immune system will not reject. The merger, subject to approval by shareholders and regulators, is expected to close in first quarter 2006.
The deal will give Amgen control over the experimental cancer drug panitumumab, which is being developed to treat colorectal, head, neck and other solid-tumor cancers. The drug could generate $2 billion annually, the companies said during a recent conference call.
Amgen will also take control of Abgenix's manufacturing plant in Fremont, Calif., where it will make panitumumab, a move Amgen executives said would "save or delay by many years the effort and several hundred million dollars it would cost us to build the capacity ourselves." The plant is expected to save Amgen more than $300 million through tax credits and other means.
Amgen will shoulder $450 million of Abgenix's debt through the deal. But the deal also eliminates Amgen's payments of 50 percent of operating profits for panitumumab and 5 percent royalty payments on future sales of denosumab, an osteoporosis drug the companies have co-developed, "saving [Amgen] billions of dollars over the life of the drugs," Merrill Lynch analyst Eric Ende writes. Bear Stearns analyst Mark Schoenebaum called the merge "an excellent fit."
Ende, meanwhile, made a grim projection for BMS' Erbitux (cetuximab). "We expect future Erbitux sales to be adversely affected," Ende said. "Panitumumab may be a greater competitive risk than previously believed. We expect Amgen to position panitumumab as a front-line colorectal drug as well as in head and neck cancer, and price it at a discount to Erbitux."
Amgen and Abgenix announced the merger after releasing Phase III trial results in early November that showed panitumumab reduced tumor progression in 46 percent of patients, exceeding the expected reduction of 33 percent.