Analysts: Amgen's Onyx Deal is Strategically Promising
Analysts say Amgen's Onyx deal is strategically promising
Aug. 26--It's a multibillion-dollar gamble, but industry watchers see promise in Amgen's decision to buy Onyx Pharmaceuticals Inc.
Analysts and others expect the $10.4 billion deal announced Sunday will offset revenue losses when the Thousand Oaks-based drugmaker's anemia drug patents begin expiring in coming years.
"What you don't want to do when you're Amgen is wait around too long to replace the revenue you're going to lose when your biggest product goes generic," said Erik Gordon, a business professor at the University of Michigan who follows the pharmaceutical industry. "Waiting around is the end of the line for your company."
Amgen had to do something to fill the impending gaps in its pipeline. Oncology products are a good fit because Amgen specializes in anemia products, which are often given to cancer patients, Gordon said.
Amgen is paying $125 a share for all the outstanding shares of Onyx. The South San Francisco-based biopharmaceutical company has a growing multiple myeloma franchise, and its star product, Kyprolis, is approved and patented in the U.S. until at least 2025.
"You're gambling that that's going to turn into a $1 billion- to $2 billion-a-year product and that some of the other things in the early stages of development will work out," Gordon said. "If they don't, the $10 billion is going to be wasted. It's a good idea, but it's risky. It's the kind of thing Amgen had to do."
During a recent conference call, CEO Bob Bradway said the opportunity was strategically compelling, added to Amgen's long-term growth prospects and created value for shareholders.
"Amgen has a unique opportunity to add value to Kyprolis, a product which is at an early and promising stage of its launch," Bradway said in a release.
Amgen expects the deal to close at the start of the fourth quarter.
Analysts at RBC Capital Markets like the diversification of Amgen's portfolio, saying that its supportive care drugs will soon be more than 40 percent exposed to competing biosimilars.
RBC analysts think Amgen's share price will rise because of the acquisition. During trading Monday, it jumped to an all-time high of $116.25 before closing up 7.72 percent at $113.75.
Posted: August 2013