* Amgen to pay $125 per share for Onyx
* Amgen expects deal to add to adjusted earnings in 2015
* Deal gives Amgen pipeline of cancer drugs
* Fifth-biggest biotech deal in history
By Soyoung Kim and Michael Erman
Aug 25 Amgen Inc struck a deal to buy
cancer drug maker Onyx Pharmaceuticals Inc for about
$10.4 billion on Sunday, as it moves to restock its product
pipeline in response to declining sales of its flagship anemia
The acquisition - which ends a two-month-long auction of
Onyx - represents the fifth-largest biotechnology deal in
history. It gives Amgen full rights to Kyprolis, the new
multiple myeloma drug that analysts expect to reach annual peak
sales in excess of $2 billion.
The world's largest biotechnology company will also gain a
revenue stream from the liver and kidney cancer drug Nexavar
that Onyx shares with Bayer AG, as well as royalty
payments on Bayer's much newer colon cancer drug, Stivarga, and
potential future royalties on an experimental breast cancer drug
being developed by Pfizer Inc.
Thousand Oaks, California-based Amgen has faced growing
pressure to beef up its drug development pipeline as safety
concerns have trimmed sales of its flagship anemia drugs,
Aranesp and Epogen. Also, patents on four of its five
top-selling drugs are set to expire starting in 2015.
Cancer medicines are the holy grail for many drugmakers
because current products have limited effectiveness and the
companies can charge steep prices for new biotech treatments.
Amgen said it will pay $125 per share for Onyx, a 4.2
percent increase from the $120 a share it offered in June. Onyx
said that bid significantly undervalued the company and put
itself up for sale.
The companies expect the deal to close in the beginning of
the fourth quarter. Amgen expects it to add to adjusted net
income in 2015.
Discussions between Amgen and Onyx hit a snag earlier this
month after Amgen sought access to data from Onyx's ongoing
clinical trials, people familiar with the matter told Reuters
previously. A source familiar with the matter on Sunday said
that Amgen believed it had done extensive due diligence and was
comfortable with the purchase.
Onyx shares closed at $116.96 on Friday. They closed at
$85.50 on June 28, before reports of Amgen's $120-a-share bid
BIGGEST DEAL SINCE 2001
The Onyx deal is Amgen's biggest since its $16 billion
acquisition of Immunex in 2001 which gave it the rheumatoid
arthritis drug Enbrel, now one of Amgen's biggest-selling
It is also by far the biggest deal under CEO Bob Bradway,
who assumed the top spot in May 2012. He has done a handful of
much smaller deals, the biggest to date being a $1.16 billion
acquisition of Micromet.
Large pharmaceutical companies have increasingly been
looking to acquire smaller biotech firms to gain access to new
drugs, as they face significant revenue losses stemming from
This helped drive up the volume of healthcare M&A in the
first six months of 2013 more than 30 percent compared with the
same period last year.
Recent deals include generic drugmaker Actavis Inc's
$8.5 billion acquisition of Warner Chilcott
and Human Genome Sciences' $3 billion sale to
The Onyx deal is expected to give Amgen a much higher
profile in oncology. Several of its current drugs offer
supportive care for cancer patients, such as treating anemia or
decreases in white blood cells caused by chemotherapy.
Another of Amgen's newer medicines, Xgeva, helps prevent
fractures in patients whose cancer has spread to the bone. Its
one product that treats cancer, the colon cancer drug Vectibix,
has been largely a disappointment.
Analysts expected Onyx revenue to reach $878 million in
2014, according to Thomson Reuters I/B/E/S.
Mark Schoenebaum, an analyst with ISI Group LLC, projected
that an Onyx acquisition would increase Amgen non-GAAP earnings
by 5 percent in 2015, and boost them as much as 15 to 20 percent
Lazard was the lead financial adviser to Amgen, while Bank
of America Merrill Lynch acted as co-adviser and lead arranger
for the company's financing. Centerview Partners was Onyx's
Law firms Sullivan & Cromwell and Goodwin Procter were legal
counsel to Amgen and Onyx, respectively.