Global Insight Perspective | |
Significance | Bristol-Myers Squibb (BMS) is commencing the acquisition of cancer therapeutics company Kosan Biosciences for approximately US$190 million. |
Implications | The new acquisition will add two new classes of anti-cancer medicines, and Kosan Biosciences will become BMS's subsidiary. |
Outlook | BMS has now reaffirmed its 2008 earnings guidance, assuming that ConvaTec business will be sold and accordingly the latter is treated as discontinued operations. |
Bristol-Myers Squibb (BMS) has reported the initiation of a cash tender offer to purchase all outstanding shares of cancer therapeutic company Kosan Biosciences Inc., the company reported in a press release. BMS is filing a tender offer statement with the Securities and Exchange Commission, and Kosan is filing a solicitation/recommendation statement which includes a statement from the board of directors that Kosan shareholders accept the acquisition by BMS. Jim Cornelius, BMS's chairman and Executive Officer told Business Wire, "Kosan's technology, coupled with our development and commercialisation capabilities, will result in new treatment options for patients."
U.S. biotechnology company Kosan Biosciences' leading clinical products include tanespimycin, part of the HSP90 (heat shock protein 90) inhibitors programme which is being evaluated in multiple myeloma and metastatic breast cancer, and epothilone KOS-1584 in non-small-cell lung cancer. The company decided to terminate the development of its HSP90 inhibitor, KOS-1022 (alvespimycin), for the treatment of breast cancer. Development was discontinued just six weeks after the start of Phase II trials—suggesting that the problems must have been fairly serious and perhaps safety-related (see United States: 21 March 2008: Kosan Undertakes Restructuring to Reduce Cash Burn).
Commenting on the acquisition, Kosan's president and CEO Helen S. Kim said, "We believe this transaction represents a timely opportunity to place our clinical programs and technology assets in the hands of a world-class company with the experience and expertise to bring innovative cancer treatment options to patients in need." BMS and Kosan have also entered into a separate licence agreement, giving BMS an exclusive worldwide licence to Kosan's epothilone products and intellectual property rights. Kosan will receive an initial cash payment of US$25 million and development milestone payments, as well as royalties on sales of products once they have been commercialised. This agreement will be valid even if the acquisition agreement fails to materialise, unless there is an intentional breach of covenants by BMS.
BMS has now reaffirmed its financial guidance for 2008, saying that it expects profit between US$1.60 and US$1.70 per share. This guidance assumes that ConvaTec business will be sold and treated as discontinued operations (see United States: 5 May 2008: BMS Divests ConvaTec for US$4.1 bil.).
Outlook and Implications
The acquisition of Kosan Biosciences is an important development for U.S. heavyweight BMS, expected to boost the company's competitiveness, especially in the oncology therapeutic area. By acquiring Kosan, BMS will enhance its oncology-product portfolio with two promising classes of medicines: epothilones and HSP90 inhibitors. Epothilones could have multiple potential therapeutic applications from various cancers to neurodegenerative diseases.
The Kosan acquisition is the second partnership that BMS has entered into this month. Earlier in May 2008, BMS entered an exclusive partnership agreement with domestic, privately-held biotechnology company KAI Pharmaceuticals over the development and commercialisation of cardiovascular drug treatment KAI-9803 (see United States: 14 May 2008: BMS Enters Partnership with KAI Pharmaceuticals to Develop and Commercialise KAI-9803).
The partnership agreement with KAI Pharmaceuticals and the acquisition of Kosan Biosciences are both intended to strengthen BMS's biotechnology credentials, part of the company's long-term future plan (see United States: 1 February 2008: Streamlining Strategy Shows Results as BMS Cuts Net Loss 33.5% Y/Y in Q4).
If the planned acquisition goes ahead, Kosan Biosciences is expected to improve its financial standing and gain an experienced partner for the future development and commercialisation of its products (see United States: 21 March 2008: Kosan Undertakes Restructuring to Reduce Cash Burn).