United States firm Bristol-Myers Squibb and UK drug maker AstraZeneca have teamed up to acquire US diabetes specialist Amylin in a highly unusual deal worth a total of USD7 billion.
IHS Global Insight Perspective | |
Significance | Bristol-Myers Squibb (BMS, United States) is acquiring Amylin for USD5.3 billion in cash and the payment of debt and other obligations worth USD1.7 billion. Once the acquisition is completed, AstraZeneca will pay half the price—almost USD3.5 billion—for a 50% share of the profits from Amylin's drugs and for an option that will give it an equal share in deciding how Amylin's existing and experimental drugs are managed. |
Implications | Despite BMS taking the lead, the provisions of the deal suggest that it is to all intents and purposes a joint acquisition in which the two partners will share the risk and potential gains equally. |
Outlook | The deal will boost the portfolios of both BMS and AstraZeneca with a much valued glucagon-like peptide-1 agonist, allowing them to utilise already existing diabetes drug marketing capabilities to maximise sales. A deal of this type would unavoidably bring BMS and AstraZeneca closer together, opening the door for a further potential tie-up in the future. |
Bristol-Myers Squibb (BMS, United States) and AstraZeneca (United Kingdom) jointly announced a highly unusual deal after markets closed on 29 June. Under the terms of the deal, BMS will acquire US diabetes treatments specialist Amylin for USD31.00 per share in cash, equivalent to a total cash price of USD5.3 billion. In addition, BMS will assume Amylin's debt and contractual obligations to former partner Eli Lilly (US), worth USD1.7 billion (see United States: 17 May 2011: Amylin Sues Eli Lilly over Plans to Sell Rival's Diabetes Drug and United States: 9 November 2011: Eli Lilly, Amylin Terminate Diabetes Alliance).
Once the acquisition is complete—the value of which totals almost USD7 billion—AstraZeneca will make a payment of USD3.4 billion to Amylin, which will at that point be a wholly owned BMS subsidiary. In exchange, the UK company will gain a 50% entitlement to any profits and losses arising from the collaboration. AstraZeneca will also have the option, following the closing of the acquisition, to govern "rights over key strategic and financial decisions regarding the collaboration, upon the payment to Bristol-Myers Squibb of an additional USD135 million."
Outlook and Implications
Despite nominally being a BMS acquisition deal with a follow-up agreement with AstraZeneca in place, to all intents and purposes this is a joint acquisition. According to unconfirmed media reports, BMS had offered USD22 per share for Amylin in March. It must have been somewhere around that time that BMS and AstraZeneca confirmed their mutual interests in Amylin. The journey from there to a joint agreement—of a rather unprecedented kind—has been fairly fast (see United States: 30 March 2012: BMS Eyes Amylin in Takeover Bid and United Kingdom - United States: 6 June 2012: AstraZeneca Makes USD4-Bil. Bid for Amylin amid Flurry of Suitors).
Under the terms of the agreement, the two companies effectively share the costs, risks, and benefits equally. Most significantly, the Amylin acquisition gives the two partners access to Amylin's Bydureon (exenatide extended-release for injectable suspension), a once-weekly glucagon-like peptide-1 (GLP 1) agonist. The drug is a follow-up version of Amylin's Byetta (exenatide), which is administered twice daily. Bydureon faced marketing delays—partly related to concerns about irregular heart rhythms in some patients—providing Danish firm Novo Nordisk's once-daily Victoza (liraglutide) with a head start.
Aside from Bydureon, Amylin has a diabetes drug called Symlin (pramlintide acetate), an injectable amylin analogue, approved by the US FDA for the treatment of type 1 and type 2 diabetes patients with inadequate glycaemic control on meal-time insulin. Amylin also has a pipeline product, metreleptin, a leptin analogue currently under review by the FDA for the treatment of diabetes and/or hypertriglyceridaemia (high levels of triglycerides in the bloodstream) in patients with rare forms of inherited or acquired lipodystrophy. The latter experimental drug, is also essential to the acquisition deal, as it provides the missing ingredient in the BMS-AstraZeneca diabetes franchise. The combination of oral diabetes treatment Onglyza (saxagliptin), which BMS and AstraZeneca are co-marketing, a modified release GLP-1 agonist such as Bydureon, and a leptin analogue creates an unparalleled combination of three of the main treatment mechanisms for diabetes. The unusual deal, meanwhile, allows the two partners to spread the risk in a move that is likely to alleviate shareholder concerns.
The strategic collaboration required in arriving at this deal and the closer working relationship the Amylin deal requires is likely to bring BMS and AstraZeneca closer. The path taken indicates that a closer tie-up between the two companies is possible in the future, and IHS Global Insight would not rule out a potential BMS-AstraZeneca merger at some stage in the future.