Amgen ($AMGN) appears close to bagging its biotech prey. After starting out with a $120-a-share offer for Onyx, the giant biopharma company appears to have settled on a final price of $125 a share, according to multiple news reports Saturday. And a deal is expected as early as Monday--if not before.
The $125 stock price would make Onyx ($ONXX) worth more than $10 billion, with a large part of that attributed to its recently approved cancer drug Kyprolis. The New York Times first reported the advance in negotiations, followed closely by Reuters, which notes that an offer of $125 a share values Onyx at 13 times projected revenue for 2014, making it one of the richest M&A deals in the biotech business.
"The Onyx management team exits after having created substantial and dramatic value for its shareholders," concluded ISI's Mark Schoenebaum in a note to investors today.
If this latest story is accurate--and there have been plenty of questions surrounding the behind-the-scenes negotiations for Onyx--Amgen would appear to have backed off its sweetened offer of $130 a share. A last-minute roadblock developed around Amgen's reported demand to see late-stage data on Kyprolis. There's no word in the Times today on whether Onyx handed that over, and Reuters and Bloomberg have run conflicting accounts on that matter. But a reduced price appears to have been part of the final resolution of outstanding issues.
Onyx followed a well-defined M&A script after Amgen went public with its initial offer--a 38% premium over the stock price at that time in June. The biotech rejected the number as far too small and then went out to try to start a bidding war. And despite the apparent interest of Pfizer ($PFE), AstraZeneca ($AZN), Novartis ($NVS) and others, no other firm offer hit the table. AstraZeneca was most recently identified as doing due diligence on the numbers, but they would appear to have little time now if they want to counter Amgen.
One of the Times sources says that Onyx and its advisers at Centerview Partners have satisfied themselves that they got the best premium possible.
Onyx scored big when it gained an early approval of Kyprolis on midstage data. The new late-stage trial results are needed to secure and expand the global market for the drug, which analysts believe is likely to earn about $2 billion a year. Onyx also co-markets Nexavar with Bayer, which may soon find itself partnered with Amgen. And Onyx also has a 20% royalty stream coming in from Bayer's Stivarga, which bears a close resemblance to Nexavar.
The security of blockbuster income from approved cancer drugs is a major driver in this deal. Amgen's aging anemia franchise is threatened by lower cost knockoffs, and cancer drugs have become a prize asset as manufacturers command 6-figure sums for new treatments. That helps explain why Amgen muscled in with an aggressive offer at the start, in hopes of blocking any rivals from getting into the game.
All the stories note, though, that until there's ink on the contract, no deal is done.
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