Topics:

Bristol-Myers outbids Big Pharma pack and nabs Amylin for $5.3B

Tools

Bristol-Myers Squibb got the bidding started on Amylin ($AMLN) when it stepped in with a $3.5 billion offer back in February. Late on Friday it completed the quest, agreeing to buy out the biotech company in a deal valued at $7 billion. And AstraZeneca ($AZN), which has been at the auction table itself, walked away with an expanded marketing pact on Bristol's new portfolio of diabetes drugs, agreeing to pay $3.4 billion for the opportunity.

To complete the deal, BMS ($BMY) will buy up Amylin stock at a price of $31 a share--a $5.3 billion purchase. Add in Amylin's debt and a hefty $1.7 billion payment commitment to Eli Lilly ($LLY) and the deal value rises to about $7 billion. BMS is paying just a bit less than a 10% premium for Amylin's shares based on Friday's close. Of course, the share price had risen dramatically as a series of carefully timed leaks fed investors a regular diet of insider info on the auction that had developed for the company. Amylin's shares traded at only $8 last fall.

Analysts who follow the companies had varying opinions on the price. Some thought it was on the high side--others thought it was almost ridiculously expensive.

The buyout "looks a bit rich in terms of the price paid and it's a trend in the sector, where biotech companies are commanding significant premiums, higher than they would have commanded in previous years because the pharmaceutical sector is being forced down this road," Navid Malik of Cenkos Securities tells Bloomberg.

"It doesn't make sense to me that someone's going to pay this ginormous premium for Amylin," Rodman & Renshaw's Michael King offered to Bloomberg. "The desperation of big pharma is the best thing Amylin has going for itself."

Bristol, which has had a busy and rewarding string of clinical successes in the past few years, also is watching generic competition slice away its franchise on Plavix. AstraZeneca, meanwhile, is being battered by falling sales itself. And the general scramble to bring in new products and start generating extra revenue is forcing up the value of the companies that are considered worth buying.

To prove the critics wrong, Bristol will now set out to see if it can do a much better job marketing Byetta and the long-acting Bydureon, which both rely on exenatide as the primary ingredient. Analysts believe that an aggressive campaign could almost triple the revenues that Amylin had earned. But lackluster sales of Bydureon so far has tempered some of the initial enthusiasm about its potential earning power. 

Whatever criticism Amylin earned on the marketing side of the business, it certainly knows how to throw an auction party. Publicly, Amylin and all bidders remained mute. But Reuters and Bloomberg kept up a steady stream of tips on the bidding. Merck, Novartis and Sanofi all reportedly helped drive up the price of Amylin with their own bids, but were ultimately left at the altar as the original suitor proved the most ardent.

Serving as a kind of honorary best man was Carl Icahn, who invested heavily in Amylin and made off with a nice return. Reuters did the math and found that Icahn earned a little more than $80 million on his efforts--or 22%. That's acceptable, but hardly the kind of big score that he angles for.

- here's the press release
- read the Bloomberg report
- here's the story from Reuters on Icahn's profits

Related Articles:
Bids value Amylin at up to $4.7B, Bloomberg reports
Report: 5 biopharma companies prep final offers for Amylin