Strengthening the Portfolio
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Amylin Acquisition
Last Friday, the pharmaceutical maker Bristol-Myers Squibb (NYSE: BMY), acquired the diabetes drug maker Amylin (NASDAQ: AMLN) for $5.3 billion, or $31 per share. The total cost of the deal reflects a payment to Eli Lilly & Company (NYSE: LLY), and debt payment obligations that total $1.7 billion. The move now gives the company access to approval to supply and provide a set of diabetes medications. This, was after Bristol-Myers’ unsuccessful attempt to gain approval for a diabetes drug Forxiga, failing to win FDA approval in the US. The FDA said at the time it needed more information about the drug. The deal is set to initiate in 30 days.
The terms of the definitive merger agreement required Bristol-Myers Squibb to initiate a cash offering to purchase the outstanding share of Amylin’s common stock for $31, per share, a 41 percent premium to an offer rejected in March. The finalization of the deal included favorable terms for Amylin, including the payment of a majority of shares of outstanding common stock, on a fully diluted basis, and termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, which is often required when companies merge in the US.
AstraZeneca & Bristol-Myers Squibb Alliance
Shortly after the acquisition was announced to the general public, Bristol-Myers Squibb and AstraZeneca (NYSE: AZN), stated that following the completion of acquisition, the companies would enter into a collaborative agreement, based on an existing diabetes alliance framework; the collaboration is in regard to the commercialization of Amylin’s portfolio of bio pharmaceuticals. Following the merger, AstraZeneca will make a payment to Amylin, the amount being $3.4 billion in cash, with profits and losses being shared among the two companies. AstraZeneca could retain the right to equal governing control of the company if it so chooses, at a cost of $135 million.
This holds part of an agreement started in January 2007 that tied the two companies together in the type 2 diabetes drug market. The focus of the collaboration included ONGLYZA (saxagliptin), a DPP-4 inhibitor, and dapagliflozin, an SGLT2 inhibitor. ONGLYZA has been approved for use in 77 countries including the US, Canada, Mexico, India, Brazil, and China.
The move comes as a relief to AstraZeneca, whose CEO David Brennan stepped down at the beginning of the month after the drug Seroquel lost protections in March. The drugs sales were expected to drop $3.27 billion this year from $5.82 billion the year previous.
"Amylin's innovative diabetes portfolio, talented people and state-of-the art manufacturing facility complement our long-standing leadership in metabolics," said Lamberto Andreotti, chief executive officer, Bristol-Myers Squibb. "We are pleased to be able to strengthen the portfolio we have built to help patients with diabetes by building on the success Amylin has had with its GLP-1 franchise. The acquisition of Amylin by Bristol-Myers Squibb is also a unique way for Bristol-Myers Squibb and AstraZeneca to expand the alliance between the two companies, and it demonstrates Bristol-Myers Squibb's innovative and targeted approach to partnerships and business development."
Nearly 300 million people worldwide suffer from diabetes, with 26 million in the US. Diabetic patients run some of the highest risks of heart disease, stroke, kidney disease, bone failure, and limb loss. The American Diabetes association applauded the US Supreme Court’s measures to approve the US Affordable Care Act. The organization estimates that nearly 79 million Americans are susceptible to diabetes eventually in their lives. In other recent news, Amylin contributed $1.5 million to the organization in support of its Distinguished Scientist Award.
Analysis
The move proves that Bristol-Myers is serious about the diabetes market which will grow in importance as American baby boomers begin to hit retirement. With the cost of healthcare associated with aging diseases, I foresee both benefits in the long run of the deal and immediate effects in strengthening the portfolios of AstraZeneca, and Bristol-Myers.
muhammadbazil has no positions in the stocks mentioned above. The Motley Fool owns shares of AstraZeneca plc (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
