In a bid to diversify its business to combat the generic threat
and bolster its position in the lucrative diabetes market,
Bristol-Myers Squibb Company
(
BMY
) recently announced that it will purchase biopharmaceutical
company
Amylin Pharmaceuticals, Inc.
(
AMLN
) for $31.00 per share or approximately $5.3 billion in cash.
Moreover, the deal will see Bristol-Myers assuming Amylin's net
debt and making a contractual payment to Amylin's former partner,
Eli Lilly & Company
(
LLY
). The total value of the deal will extend to $7 billion in that
case. We remind investors that in November 2011, Amylin and Eli
Lilly terminated their partnership for the worldwide development
and commercialization of exenatide.
Bristol-Myers also announced that it will expand its partnership
with
AstraZeneca
(
AZN
) on diabetes drugs for developing and marketing Amylin's diabetes
candidates/drugs following the closure of the Amylin deal. The
expanded deal will see AstraZeneca making a payment of $3.4 billion
in cash to Bristol-Myers.
This cash inflow will bolster Bristol-Myers' balance sheet since
the Amylin buy means it will shell out a significant amount.
Bristol-Myers and AstraZeneca will share the profits and losses
from the partnership equally.
Offer Price Represents Significant Premium
The offer price represents a premium of 10% on Amylin's closing
price as of July 29, 2012. The Boards of both companies have
approved the deal, which will close following a cash tender offer
and second step merger. Amylin's stockholders have been advised by
the company's board to tender their shares when Bristol-Myers
launches the cash tender offer.
Deal is Mutually Beneficial
We believe that Bristol-Myers' impending takeover of Amylin will
benefit both companies. We note that following the termination of
Amylin's exenatide agreement with Eli Lilly in November 2011,
Amylin has been considered to be a potential takeover candidate for
companies with a focus on diabetes. Amylin's exenatide franchise
consists of Byetta and Bydureon (once-weekly exenatide).
While Byetta sales have been lagging expectations, Bydureon,
which was launched earlier this year in the US, could very well be
a blockbuster. Moreover, the deal is beneficial for Amylin's
stockholders as can be seen from the significant premium on the
offer price. Amylin's shares shot up significantly from the time
acquisition rumors started in March 2012.
The Amylin acquisition is a smart, strategic move by
Bristol-Myers since it already has a presence in the diabetes
market (Onglyza and Kombiglyze). Moreover, the loss of exclusivity
of its blockbuster blood-thinner Plavix on May 17, 2012 in the US
is likely to result in substantial revenue losses for
Bristol-Myers.
The Amylin buy, through which Bristol-Myers aims to expand its
presence in the lucrative diabetes market, is an effort to combat
the substantial revenue losses due to Plavix's genericization in
the US.
The announcement of the Amylin deal is the second major deal for
Bristol-Myers this year. In February 2012, Bristol-Myers purchased
Inhibitex, Inc., for $2.5 billion targeting the lucrative HCV
market.
Neutral on Bristol-Myers, Amylin
We currently have a Neutral recommendation on Bristol-Myers. The
stock carries a Zacks #3 Rank (Hold rating) in the short run. Our
stance is similar on Amylin.
AMYLIN PHARMA (AMLN): Free Stock Analysis
Report
ASTRAZENECA PLC (AZN): Free Stock Analysis
Report
BRISTOL-MYERS (BMY): Free Stock Analysis Report
LILLY ELI & CO (LLY): Free Stock Analysis
Report
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