Amgen soars after bagging Onyx Pharma in $10.4B buyout deal

Amgen was the first company to make it to the auction block for Onyx Pharmaceuticals. And in the end, it was the only serious bidder at the table. 

After starting out with an unsolicited $120-a-share offer for Onyx ($ONXX), the giant biopharma company settled on a final price of $125 a share--all of it to be paid in cash--valuing Onyx at $10.4 billion, or $9.7 billion net of cash. News of the impending buyout had been percolating all weekend long after The New York Times first reported Saturday morning that a deal was at hand.

The final price says a lot about Onyx CEO Tony Coles' record. He scored big with a deal to buy Proteolix and the blood cancer drug carfilzomib (Kyprolis) for $276 million in cash and $445 million in milestones--after the $170 million milestone for an early approval gave way to a final $80 million payoff on the FDA's decision last summer. Coles also aggressively went after Bayer when Onyx laid claim to a portion of Stivarga, filing suit before winning a big chunk of the revenue.  

"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 Saturday.  

Amgen came out looking pretty good as well. Its shares barreled up almost 10% on the news as analysts cheered a deal that could reignite the company's growth.

Amgen ($AMGN) apparently 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 whether Coles ever 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.

The multibillion-dollar deal marks a coup for Amgen CEO Robert Bradway, who's been executing a series of deals in an effort to broaden the big biotech's product lines as well as its pipeline.

"We believe that Amgen is strongly positioned to realize the full potential of Onyx's portfolio and pipeline for the benefit of physicians and patients," said Bradway in a statement. "Our acquisition follows a thorough due diligence process and is fully consistent with our strategy of advancing innovative medicines that address serious unmet medical needs. We expect this acquisition will accelerate growth and enhance value for Amgen shareholders."

Bradway took over as CEO back in May 2012. At that time the company had recently cut back on R&D to focus on an ambitious late-stage pipeline assembled by Roger Perlmutter, before the then-R&D chief was squeezed out. But the ex-investment banker still had plenty to prove, with an aging group of blockbusters facing generic competition. Now his record will depend quite a lot on how successfully Amgen capitalizes on this buyout. 

South San Francisco-based 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.

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 comarkets Nexavar with Bayer, which now finds itself partnered with Amgen. Onyx also has a 20% royalty stream coming in from Bayer's Stivarga. And Pfizer has been pushing development of palbociclib, a promising cancer drug that emerged from a collaboration with Onyx that could eventually provide an 8% royalty to Amgen.

The next step will see how many of Onyx's 900 staffers will make the transition to Amgen. Typically in buyouts like these, the acquiring company makes deep cuts to help cover the cost of acquisition.

- here's the release

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