Stock of the Day
|
Abgenix Inc (ABGX)
Amgen Will Buy Abgenix in $2.2 Billion Deal
After the market close on Wednesday, biotechnology giant Amgen Inc., announced that it would buy Abgenix Inc.for $2.2 billion and assume some of their debt. Amgen will buy shares of Abgenix for $22.50, a 54 percent premium over Wednesday's closing price of $14.65. The deal will give Amgen complete ownership over a cancer drug the two companies jointly developed, panitmumab. The drug still needs regulatory approval, which the companies expect to receive in early 2006. Amgen predicts sales of the drug could exceed $2 billion a year. Following the announcement, Amgen (AMGN: Charts, News, Offers)climbed 4% in aftermarket trading, and Abgenix soared nearly 50%. Amgen is already one of the biggest biotechnology companies around, so what impact will this merger have on competition within the industry?
|
| Daily Chart |
If you are not able to see the chart, your email client probably does not support javascript. To view it, please click here
|
| Stock Analysis |
Amgen has a market capitalization of $94.8 billion, making it the second largest biotechnology company in the world, after Genentech, which has a market capitalization of $99.6 billion. With a sizeable presence already, the merger could spell trouble for competitors, particularly ImClone Systems, who has partnered with Bristol-Myers Squibb to produce their own cancer drug, Erbitux. Erbitux has been approved as a treatment for colorectal cancer patients who have not responded well to chemotherapy, and it is also being tested as a treatment for head and neck cancers. So far, it looks like panitmumab will be in direct competition with Erbitux. Amgen and Abgenix also plan on testing panitmumab as a treatment for head and neck cancers, and in early November, they revealed positive phase III clinical data for the treatment of colorectal cancer patients who didn't respond to chemotherapy.
|
In the experiment, which involved 463 patients, panitmumab slowed the progression of the colon cancer by 46 percent, whereas expectations had only been a slowing of 33 percent. The above expectations performance was part of the rationale behind the deal. Amgen's CEO, Kevin Sharer, said "We paid a strong premium because we see significant upside." The merger will allow Amgen to avoid having to pay any royalties on the drug's sales. Sharer expects the deal to be profitable for the company once sales of the drug reach $1 billion.
|
Panitmumab was the driving force behind the deal, but there are other operations in the works. Abgenix and Amgen are also working on a treatment for bone cancer and osteoporosis, called denosumab. Amgen will also be acquiring Abgenix's XenoMouse technology, which is used to develop therapies using mouse antibodies and genetic manipulation For investors who hold shares of Abgenix, the benefits from the deal are obvious just from looking at the premium in price. Amgen gains the complete ownership of a drug that could top $2 billion in year sales, as well as a couple other valuable technologies. In short, the deal has clear benefits for both parties in the merger, and other companies are going to have to adapt, and possibly consolidate themselves, in order to compete effectively.
|
Profile |
The Company's principal activities are to develop and commercialize fully human monoclonal antibody therapies for cancer and other diseases. The Company's technology and integrated product development platform enable rapid generation and selection of product candidates for disease targets appropriate for antibody therapy. It leverages the human antibody technology to build a large and diversified product portfolio. It develops its own proprietary products internally and establishes licensing arrangements with multiple biopharmaceutical collaborators. The Company has four products in development: ABX-IL8, ABX-EGF, ABX-MA1 and ABX-PTH in clinical trials. In addition, the Company has four customer-developed antibodies generated with XenoMouse technology in clinical trials from collaborations at Amgen and Pfizer.
|
|
|
|
|
