UPDATED: Onyx sets out to spark a bidding war following $10B Amgen offer

A little more than a day after the Financial Post broke the story that Amgen had bid $120 a share for Onyx Pharmaceuticals, the biotech company has confirmed the offer and put the company up on the auction block.

Onyx added that it has rejected Amgen's ($AMGN) offer--a standard ploy for an unsolicited overture like this--and countered by seeking higher offers in a move aimed at triggering a bidding war. And with the company now officially up on the auction block, the biotech ($ONXX) vowed to keep the rest of the M&A process under lock and key. That may not be realistic, though, given the porous nature of these discussions as various parties jockey for position behind the scenes.

Immediate speculation is likely to focus on Bayer's interest in buying Onyx. The German pharma company has been rapidly beefing up its oncology division and has been cited repeatedly by analysts as a likely buyer--provided it could come to terms with Onyx. Bayer is partnered with Onyx on Nexavar and controls the lion's share of Stivarga, which pays out 20% royalties to the big biotech. The fast-moving multiple myeloma drug Kyprolis (carfilzomib), though, is controlled by Onyx and has substantially bolstered its market value.

A spokesperson for Bayer declined comment when asked if the company was mulling an offer, telling FierceBiotech that "we do not comment on market rumors."

Onyx's stock closed at a little above $86 a share on Friday but swiftly zoomed up 25% after the unconfirmed report from the Financial Post hit the wires. Bloomberg quotes a source close to the negotiations as saying that the total number of outstanding shares puts the value of Amgen's bid at $10 billion. By the end of day on Monday, the biotech's shares topped $131, which would make Onyx worth about $11 billion--more than 50% above its Friday close.

Some analysts have already provided a thumbs up to Amgen for its M&A strategy.

"Strategically, this deal makes a great deal of sense for Amgen, in my opinion," noted ISI's Mark Schoenebaum in a quick note Friday night. "As you may know, Amgen already has a very large cancer franchise. Aranesp, Neupogen, Neulasta, and Xgeva are all major cancer franchises for the company. However none of these drugs are direct anti-tumor agents. Thus, strategically, Onyx's drug Kyprolis would fit in exceptionally well with Amgen's existing sales and marketing infrastructure."

Prospective M&A deals like this are relatively unusual in the biotech industry these days. In early 2011 Sanofi ($SNY) nabbed Genzyme in a $20 billion acquisition. But sated by a big round of M&A deals from the last decade, which often drew flak from analysts, Big Pharma has largely been sitting out sizeable acquisitions like this in recent years. As a result, second-tier biopharma companies have been stepping up to the forefront. Gilead ($GILD) drew a lot of attention for buying Pharmasset for $11 billion in 2011 and last summer Bristol-Myers Squibb ($BMY) acquired Amylin--with AstraZeneca ($AZN)--in a $7 billion deal.

Most of the buyout interest recently has been focused on classic bolt-on acquisitions, though companies like Shire ($SHPG) continue to spark a significant amount of market speculation about a potential takeover. Also, Royalty Pharma has been angling to buy Elan for about $8 billion, though the Irish company has few actual drug assets after selling off rights to Tysabri to Biogen Idec ($BIIB).

"Onyx has tremendous momentum and, with the expansion of our pipeline and two successful product launches, the company and our talented employees have created significant value for Onyx shareholders," said Onyx CEO Tony Coles in a statement. "The board and the management team remain focused on the opportunities in front of us, including the potential to expand the use of our existing therapies in different types of cancer and across different lines of therapy, as a result of several ongoing Phase III studies. We are actively exploring the potential to combine Onyx with another company as an option to create additional value for Onyx shareholders."

- here's the press release
- here's the story from Bloomberg

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