After turning down an unsolicited bid from Bristol-Myers Squibb (BMS) in February, Amylin Pharmaceuticals is preparing to weigh offers from BMS and up to six other potential suitors. Citing unnamed “people familiar with the matter,” Bloomberg News reported that BMS has joined AstraZeneca, Merck & Co., Pfizer, Roche, Sanofi, and Takeda in signing confidentiality agreements allowing them access to Amylin’s financial and product information as they prepare a bid for the company. Amylin has hired Credit Suisse and Goldman Sachs as its financial advisers and Skadden Arps as its legal adviser, according to Reuters.
The scramble follows the end of a brief lawsuit filed against Amylin's board by activist investor Carl Icahn, Amylin’s third-largest shareholder with 14.4 million shares (an 8.9% stake) as of the end of last year. Icahn dropped his quest to nominate his own dissident-shareholder directors to the board following a meeting with Amylin CEO Daniel Bradbury.
First-round bids are due in the next two weeks, two of the unnamed people told Bloomberg. Publicly traded Amylin enjoys market capitalization of more than $4 billion. Last year, Amylin generated more than $650 million in revenue, in large part on sales of the diabetes drugs Bydureon and Byetta.
Amylin received regulatory approval for Bydureon, a once weekly formulation of its earlier diabetes drug Byetta, in January. Robyn Karnauskas, an analyst with Deutsche Bank, has estimated that Bydureon alone may generate $1.5 billion in peak annual sales in the U.S. Amylin has sought a partner to help market Bydureon outside the U.S. since November, when it ended a collaboration with Eli Lilly & Co.
"The number of potential bidders is not surprising and fully validates the biopharma team's view (since the day of the Lilly divorce last November) that Amylin would be bought,” Leerink Swann analyst Seamus Fernandez noted.
BMS bid $22 a share for Amylin simply “sets a floor for any bid,” Fernandez wrote. “Our best guess is that the deal could get done reasonably in the mid-$30s for the right acquirer and a bidding war could push the number even higher should one ensue.”
Fernandez wrote that Amylin would be the most strategic acquisition for Sanofi, followed by Merck, because those companies best met four criteria: (1) an existing and leverageable presence in diabetes for several years, (2) a diabetes presence under threat, (3) a strong R&D commitment to metabolic disease and diabetes, and (4) the company views diabetes as a critical leverageable long-term fundamental growth opportunity.
Sanofi rose to the top, according to Fernandez, based on a growing leadership position in diabetes that faces direct competitive threat, namely the $5 billion Lantus franchise, the core growth asset in Sanofi's diabetes division. Within the injectable insulin segment, Sanofi’s position with Lantus is threatened by generic basal insulins from Lilly and other competitors, and novel basal insulins from Lilly, Novartis, and other competitors. Lilly is set to report Phase II data next month, and Novartis' degludec is expected to obtain global approvals in the second half of this year.
Sanofi is also seeking to expand its injectable diabetes franchise with its once-daily GLP-1 candidate, Lyxumia, licensed from Zealand Pharma. Sanofi's current strategy is to extend the Lantus franchise by developing a titratable single-pen injection formulation of Lantus+Lyxumia, but movement into Phase III has been delayed several times and currently is expected to advance in 2013. That would put Sanofi behind Novartis’ Ideglira fixed-dose combination of Victoza and Degludec, for which data is likely to be published in July or August.
Amylin would bring several key strategic positives and substantial operational synergies for Sanofi, Fernandez said. These include Byetta's recent label upgrade to include dosing in combination with Lantus, an immediate early potential synergy assuming no blocking options from Zealand; an immediate presence as first to market GLP-1; and immediate R&D synergies since Sanofi would be expected to shut down any internal plans for its own long-acting formulation of exendin-4.
According to one unnamed source cited by Bloomberg, Sanofi has internally discussed the rationale of a bid, given doubts about the potential of Bydureon and the fact that Byetta would compete with Sanofi’s own experimental version of a similar drug, lixisenatide.
“Sanofi has been very explicit that they want a full range of products and services for diabetes,” Mark Clark, an analyst at Deutsche Bank in London, told Bloomberg. “Diabetes is an area companies either want a position in or want a stronger position in.”
Reasons favoring Merck as Amylin’s buyer include what Fernandez called its deep commitment to diabetes, its pursuit of novel insulin technology through the Smart Cell acquisition, as well as its oral DPP-IV franchise facing more global competition from BMS, AstraZeneca, and Takeda.
“Amylin is not a massive financial stretch," Clark added, "so it comes down to what companies’ alternatives are, whether there are other synergies involved, and who it makes the most sense to. Some companies are more desperate for revenue sources than others.”
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