Third Point's Dan Loeb Talks Up An Amgen-Allergan Merger
November 18, 2015
By Mark Terry, BioSpace.com Breaking News Staff
With a probable Pfizer -Allergan merger announcement expected next week, activist investor Dan Loeb threw a wrench into the gears, tossing out the idea of a merger between Amgen and Allergan . Loeb is the founder of Third Point hedge fund and holds a stake in both companies.
Speaking at the Robin Hood Investors Conference in New York yesterday, a closed event, several insiders who were there told Bloomberg that Loeb “spent most of the presentation praising Allergan, which he compared to a baby thrown out with the bathwater during a sell-off in healthcare stocks in August and September.”
It’s not exactly a new area of speculation. Just last week The Financial Times, quoting inside sources, reported that Amgen, headquartered in Thousand Oaks, Calif., might be in the market to buy a company, potentially in the $10 billion range. That time, focus was on Amgen acquiring Cambridge, Mass.-based Alnylam Pharmaceuticals .
Other potential targets cited have been Seattle Genetics, Inc. , Dr. Reddy's Laboratories Ltd. , and Aspen Pharmacare Ltd. Back in January, there was speculation that Paris-based Sanofi SA was also looking at Alnylam.
A year ago, in October 2014, Loeb was urging Amgen to break up into two companies, dubbing them GrowthCo and MatureCo. GrowthCo would focus on research and development of newer, faster-growing drugs, while MatureCo would focus on slower-growth, mature products.
Interestingly, there’s quite a bit of speculation that if the Pfizer-Allergan deal did come together, it would only be a year or so before the mega-company split into two, one for mature drugs, the other for the research-and-development-based faster growing drugs.
Amgen does have a problem. Primarily it revolves around biosimilar competition and the lost off patent protection. On March 6, the U.S. Food and Drug Administration (FDA) approved the first biosimilar, Novartis AG ’s Zarxio, a biosimilar of Amgen’s Neupogen. In October, Amgen’s Neulasta lost its U.S. patent protection, and its European patent ends in 2017. The company’s Epogen lost patent protection in 2014.
According to U.S. Securities and Exchange Commission (SEC) filing, Third Point increased its stake in both Amgen and Allergan in the third quarter. As of September 30, Amgen is Third Point’s second-largest investment and Allergan is it’s third largest. Loeb, as reported by Bloomberg, said a merger between the two would lead to strong growth and have multiple cost synergies.
One of the reasons Loeb was calling for a split last year had to do with Amgen’s acquisition of Onyx Pharmaceuticals, Inc. in 2013. As part of that buy, it acquired Kyprolis. Initially Kyprolis was slow to gain traction in the market, but in this year’s third quarter, the drug showed a 46 percent year-over-year sales increase. This rather undercut Loeb’s argument and gave Amgen a reason to jump back into the merger-and-acquisition market that’s been so active this year.
So will an Allergan-Amgen merger happen? It seems unlikely, with the Allergan-Pfizer talks so active recently. If those were to fall apart or if Amgen were to make a competitive bid, it’s possible, although insiders are indicating that the Pfizer merger is completely dependent on Allergan’s Brent Saunders taking over as chief executive officer. Loeb apparently also said an Allergan-Pfizer deal makes sense, and from a tax point of view it seems completely beneficial to Pfizer, which would be able to shift its tax domicile to low-corporate-tax country Ireland.
Investors seemed to like the idea, with Amgen bumping up from $151.55 per share on Friday, Nov. 13, to a current share price of $158.49. Loeb’s comments aren’t necessary the source of the increase, however. Shares traded on Sept. 28 for $132.24, then jumped to $161.88 on Nov. 4. This year’s high was on July 31, when shares traded for $176.59.