Wednesday, December 14, 2005

Amgen acquires Abgenix

Amgen (AMGN), the world's largest biotechnology company, and Abgenix, Inc. (ABGX,) a company specializing in the discovery, development and manufacture of human therapeutic antibodies, today announced that they have signed a definitive merger agreement under which Amgen will acquire Abgenix for approximately $2.2 billion in cash plus the assumption of debt. All in, about an 80% premium to Abgenix’ market cap.

Amgen benefits in two ways:

  1. full ownership of an advanced pipeline product, panitumumab, and

  2. elimination of a royalty from Abgenix sales of denosumab (formerly AMG 162)…this represents about 20% of sales of AMG 162

Panitumumab is Amgen's and Abgenix's most advanced cancer therapeutic.

The purchase will add to Amgen’s protein manufacturing capabilities with a 100,000 square foot manufacturing plant in Fremont, California. Abgenix also brings scientific knowledge and assets, such as the ownership and capabilities of the proprietary fully human monoclonal antibody technology, XenoMouse. Amgen also obtains another human antibody for postmenopausal osteoporosis and bone related cancer indications.

The XenoMouse technology creates a fully human monoclonal antibody that contains no mouse protein and was deployed to create Panitumumab. The goal in producing fully human monoclonal antibodies is to avoid immune or allergic reactions.

Unlike most biotech companies, AMGN is profitable, pays taxes, and produces free cash flow. Despite what seems to me a fairly steep price on more traditional valuation metrics, AMGN does pick up about $300 million in tax loss carryforwards. Abgenix SG&A can also represent a significant cost saving.


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