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AstraZeneca Partners With Bristol-Myers to Buy US Group Diabetes Specialist Amylin for $7bn

From Guardian Web (July 2, 2012)

AstraZeneca has moved to bolster its flagging drug pipeline with a three way deal involving US biotech business Amylin.

Amylin is being bought by Bristol-Myers Squibb for $7bn, and as part of the deal AstraZeneca will pay $3.4bn of the cost. In return Amylin’s products and portfolio will be shared between the two. Up to five companies were reportedly interested in Amylin, which had previously rejected a $3.5bn offer from Bristol-Myers. Savvas Neophytou at Panmure Gordon welcomed the deal, saying:

Investors may grit their teeth at the price, but AstraZeneca’s joint acquisition of Amylin was strategically necessary and consistent with previous management communication.

The deal structure, in collaboration with partner Bristol-Myers Squibb, introduces an element of risk sharing which is also welcome and the company should be able to fund this transaction from existing resources.

With AstraZeneca and Bristol-Myers already collaborating on diabetes, this transaction makes sense because Amylin’s most valuable asset is Bydureon, an injectable GLP-1 agonist, which fits well with Astra/Bristol’s portfolio of Onglyza and dapagliflozin.

Naresh Chouhan at Liberum Capital said:

AstraZeneca will in effect pay for half the deal ($3.4bn). In our note two weeks ago we showed why small speciality pharma deals like Amylin would be the key core of the turnaround strategy at Astra and if they were to do so it would be a meaningful contributor to the 95% five year total shareholder return that we identified. We believe the probability of the meaningful turnaround is increasingly likely.

But Dr Mike Mitchell at Seymour Pierce was less positive:

[The deal] demonstrates in, our opinion, the desperation of the business in terms of pipeline-filling. We note that under the current terms of the deal, AstraZeneca will not have equal governance rights to ‘key strategic and financial decisions’ regarding the collaboration until it pays an additional $135m. Considering the long-standing position of AstraZeneca to look for external opportunities for product development, we are uninspired by the final terms of this deal. We stay with reduce.

In the market AstraZeneca has dipped 10.5p to 2842.5p. Shire, sporadically tipped as a bid target for the likes of AstraZeneca, has lost 48p to £17.84 after the Amylin deal was deemed to make such a move less likely.


 

Posted: July 2012


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