Amgen M&A Speculation Heats Up With Four Potential Targets

Amgen M&A Speculation Heats Up With Four Potential Targets
November 10, 2015
By Mark Terry, Breaking News Staff

After yesterday’s report that Thousand Oaks, Calif.-based Amgen might be considering a big acquisition, today analysts are speculating on possible targets.

An unnamed source, presumably a company insider or top investor with inside information, told The Financial Times that Amgen was considering acquisition targets in the $10 billion range. Amgen has mostly avoided large acquisitions since its Onyx Pharmaceuticals, Inc. purchase in 2013 for about $10 billion. In that deal, Amgen also acquired the rights to Kyprolis, a cancer drug, but the drug’s initial sales were slow, causing dissent among investors.

In October 2014, activist hedge fund manager Daniel Loeb, of Third Point, urged Amgen to break up into two companies, nicknaming them GrowthCo and MatureCo. GrowthCo would focus on research and development of newer, faster-growing companies, while MatureCo would focus on slower-growth, mature products. Loeb apparently wasn’t the first person to suggest such a move, acknowledging that Geoffrey Porges, an analyst at Sanford C. Bernstein had suggested it earlier.

Clearly this was ignored by Amgen. As noted by Hannah Ishmael with BidnessEtc, Amgen announced ambitious revenue targets late last year, promising to up operating margin by 15 points to 52 to 54 percent and deliver $1.5 billion in yearly cost savings by 2018. Also, Kyprolis gained traction in the market, delivering 46 percent year-over-year and 15 percent sequential increase in third-quarter sales to $137 million. It also received expanded approval in early 2015 for treatment of multiple myeloma. It also is expected to receive more approvals, particularly in combination cocktail treatments.

So, if Amgen is considering a major acquisition, who’s the likely target? Ishmael cites four companies: Seattle Genetics, Inc. , Alnylam Pharmaceuticals , Dr. Reddy's Laboratories Ltd. , or Aspen Pharmacare HLD (APNHF).

Seattle Genetics, Inc. markets Adcetris, a drug for two types of lymphoma, and is currently being analyzed in over 30 clinical trials for other lymphomas. The company also has another six similar drugs in clinical-stage development.

Alnylam Pharmaceuticals, Inc. focuses on treatments using its ribonucleic acid interference (RNAi) platform. Marko Kozul, an analyst with Leerink Partners, projects the company could hit almost $1 billion in sales by 2020 based on its pipeline of products for rare diseases. There are rumors in January 2015 that Alnylam was an acquisition target of Paris-based Sanofi SA .

Dr. Reddy’s Laboratories Ltd. is based in India and is the country’s second-largest drug company. It is active in the generics market, focused on gastrointestinal diseases, cardiovascular diseases, pain management, cancer, dermatology and pediatrics.

Aspen Pharmacare HLD is headquartered in KwaZulu-Natal, South Africa, and is the largest drug company in Africa. It too is strong in the generics market and has international reach.

The generics business has been very active this year in the mergers and acquisitions market. Israel-based Teva Pharmaceutical Industries Ltd. acquired Allergan plc ’s generic drug business for $40.5 billion in late July. Philadelphia-based Lannett Company, Inc. announced in September that it was buying Kremers Urban Pharmaceuticals Inc. for $1.23 billion. Kremers Urban is the U.S.-based specialty generic pharmaceuticals subsidiary of Belgium-based UCB S.A. In July Jordan-Hikma Pharmaceuticsl (HIK.L) bought Boehringer Ingelheim’s U.S. generic drugs unit for $2.65 billion. In May, Endo Pharmaceuticals Plc bought Par Pharmaceutical Holdings Inc. for $8.05 billion, making it among the top five generic drug companies in the U.S.

Amgen is also facing or has already had to deal with drugs losing patent protection, as well as biosimilar competition. 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. Amgen’s Neulasta lost its U.S. patent last month, and its European patent ends in 2017. The company’s Epogen lost patent protection in 2014. Much of the patent-cliff problems revolve around Amgen’s cancer drugs, so it’s possible it will look to acquire a company that will help bolster its oncology market presence.

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