Proposal was turned down earlier this year, according to unnamed sources talking to Bloomberg News.

Amylin Pharmaceuticals rejected an overture from Bristol-Myers Squibb (BMS) valued at $3.5 billion, according to unnamed sources talking to Bloomberg News. BMS reportedly made an unsolicited offer to buy the diabetes drug developer for $22 per share, 43% above Amylin’s closing stock price of $15.39 on March 27.

News of the rejection sent Amylin’s price zooming 54% to $23.77 at the close of trading Wednesday. Shares dipped this morning, to $23.58 per share as of 10:30 a.m.

Citing two unnamed “people with knowledge of the matter,” Bloomberg reported that BMS proposed a $22-per-share acquisition in a letter to Amylin, whose board turned down the offer last month.

Amylin makes diabetes drugs Byetta, a twice-daily injectable form of exenatide now on the market, and Bydureon, a once-a-week injectable form of Byetta approved by FDA for type 2 diabetes on January 27 and launched to market in February. Byetta is Amylin’s flagship product, generating $517.7 million in 2011, accounting for 83% of the company’s $621.6 million in total net product sales. Those sales are down 7% from the $559.3 million racked up by Byetta in 2010, when Amylin generated $651.1 million in net product sales.

Bydureon last year contributed $15 million to Amylin’s coffers, through a milestone payment tied to the launch of the drug in the EU. Amylin received another $10 million in milestone revenue in 2010, when Byetta was launched in Japan.

BMS snapping up Amylin “is not necessarily crazy talk,” Thomas Russo, an analyst with Robert W. Baird, wrote in a research note quoted by the San Diego Union-Tribune. “There has been renewed investor debate about whether Amylin could be a takeout candidate” since November, when Amylin ended its 10-year marketing deal for Byetta with Eli Lilly, Russo wrote, adding: “This only increased following approval of Bydureon in January.”

Bydureon’s main rival is Novo Nordisk’s Victoza, a once-daily injectable drug that made news in January when its celebrity pitchwoman, TV chef Paula Deen, disclosed that she had lived with type 2 diabetes for three years. Last year Victoza generated DKK 5.991 billion (about $1.1 billion) in sales for Novo Nordisk, more than double the DKK 2.317 billion (about $413.2 million) generated by the drug in 2010.

Lilly had long marketed the drug in the U.S. for Amylin, enabling the San Diego company to save on the expense of hiring a sales force that would otherwise be needed. But with Lilly now growing its own diabetes drug portfolio, the companies ended their marketing agreement November 30. By the end of 2013, Amylin will control worldwide distribution rights to Byetta.

Lilly won approval last year for Tradjenta (Linagliptin), a portfolio of diabetes compounds to be  developed and commercialized with Boehringer Ingelheim under a January 2011 agreement. Lilly agreed to make an initial one-time payment to Boehringer of $388 million, then shelled out $478.7 million in milestones tied to the approval of linagliptin in the U.S., Japan, and Europe.

Also last year, Lilly introduced into its pipeline two potential treatments for diabetes—a novel basal insulin analog and a new insulin glargine product. And in January of this year, the FDA approved Jentadueto™, a combination of linagliptin and metformin for treatment of adults with type 2 diabetes.

The end of the marketing agreement with Lilly is not without advantages to Amylin. As a result, the company’s collaborative profit sharing expense fell $20 million during the fourth quarter to $43.1million from $63.1 million in Q4 2010, with the difference due to the end of the Lilly marketing agreement. For all of 2011, Amylin realized a $34.6 million savings in profit sharing costs.

That cost-cutting wasn’t enough to make up for the $431.587 million expense Amylin wrote into its Q4 and full-year 2011 results for “Net costs to reacquire economic interest in exenatide products” including Byetta and Bydureon. As a result, Amylin recorded a $461.471 million net loss for the fourth quarter, and a $543.399 million net loss for all of 2011.

Amylin announced in November it would pay Lilly $250 million upfront, plus a percentage of global net sales of the products, to end the marketing agreement. The percentage and duration of the payments will hinge on whether Bydureon can receive U.S. approval by June 30, 2014.

Since the end of the Lilly partnership, Amylin has sought a partner to help market Bydureon outside the U.S. Bydureon and Byetta combined could generate more than $1 billion in annual revenue over time, Phil Nadeau, an analyst with Cowen & Co. in New York, estimated to Bloomberg.

Joshua Schimmer, an analyst with Leerink Swann, wrote in a note to clients yesterday that news of BMS’ pursuit of Amylin reminded him of Sanofi’s public courtship of Genzyme, which culminated last year in it paying $20.1 billion: “We generally believe these stories are ‘leaks’ that serve a purpose. In this case, the purpose of the announcement, we believe, is to tie Amylin’s hands and prevent them from doing an ex-U.S. deal instead of a sale.”

To read the story from Bloomberg News, click here.
To read the story from the New York Times, click here.

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