Best Of Both Worlds
Not too long ago, we gave a thumb ups on Abgenix/NASDAQ: ABGX giving it a target price of $17 based on the announcement of a positive Phase III study of panitumumab in patients with metastatic colorectal cancer. The trial’s 46% decrease in tumor progression surpassed the trial's primary endpoint of 33%. With this new data, panitumumab is more than a "me too" drug. Panitumumab will compete against ImClone/Bristol-Myer’s Erbitux with dosing convenience, biweekly vs. once weekly administration and less infusion site reactions. Abgenix and its partner Amgen/NASDAQ: AMGN, plan to submit panitumumab’s BLA filing in the first quarter of 2006 with the anticipation of approval within six months.
Fast forward to the present, Amgen has also agreed to buy Abgenix for $2.2 bil in cash or $22.50 a share. The acquisition of Abgenix provides Amgen with full ownership of panitumumab and denosumab, eliminating profit sharing on panitumumab and a royalty that Amgen would have paid to Abgenix on future sales of denosumab. Amgen expects the deal a dilution of $0.05 to $0.10 on adjusted earnings per share in 2006 and 2007and accretive thereafter. The acquisition should prove to be fruitful for Amgen and is expected to be completed in first quarter of 2006. For those who are fortunate to own Abgenix, you can sell and have a tidy profit or eventually own shares of Amgen. Either way, Amgen will continue to have strong prospects driven by robust financial performance through five strong products on the market and increasing visibility on the pipeline to support sustainable growth. Despite changes to Medicare reimbursement, the company will remain competitive in the EPO and Enbrel markets.
In regards to concerns about competitor Roche’s CERA, the company has already filed a patent infringement lawsuit against Roche and has requested a permanent injunction to prevent Roche from entering the U.S. market with CERA. As you may recall, Amgen won the patent infringement case against Transkaryotic Therapies/Aventis which reflects the strength of Amgen’s patent position and should help Amgen’s case when it comes time to evaluate Roche’s CERA. Amgen indicated it believes CERA is a pegylated version of epoetin beta, which is made in mammalian cells and contains the same amino acid backbone as erythropoietin.
In Amgen’s pipeline there are several late-stage products that will drive the bottom line: Denosumab (AMG 162) for metastatic bone disease, rheumatoid arthritis and hormone related bone loss in breast and prostate cancers; panitumumab for refractory colorectal cancer; AMG 706 for Gleevec-refractory GIST (gastrointestinal stromal tumors); and AMG 531 for immune thrombocytopenic purpura (ITP).
Therefore, we see a dip in Amgen’s share prices as an opportunity.
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