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Bristol-Myers Will Buy ZymoGenetics for $885 Million
Bristol-Myers Squibb Co. said it plans to buy ZymoGenetics Inc. for $885 million to gain full ownership of a hepatitis C drug the companies are developing.
The offer of $9.75 a share in cash was an 84 percent premium on yesterday’s closing share price for Seattle-based ZymoGenetics. The deal is valued at $735 million excluding cash acquired in the purchase, New York-based Bristol-Myers and ZymoGenetics said in a statement. Bristol-Myers said the acquisition is expected to reduce earnings about 3 cents a share in 2010 and about 7 cents a share in 2011.
The companies entered into a $1.1 billion agreement in January 2009 to co-develop and share profits for ZymoGenetics’s hepatitis C drug PEG-interferon lambda. The treatment is a “great opportunity” for Bristol-Myers, said Gregory Wade, an analyst with Pacific Growth Equities LLC in San Francisco.
Bristol-Myers “was basically able to get the rest of the company for free, based on the price they paid,” Wade said in a telephone interview.
ZymoGenetics jumped 84 percent, or $4.46, to $9.76 at 4 p.m. in Nasdaq Stock Market composite trading. The company’s shares traded as high as $24.50 in 2006 and have declined since. With today’s increase, the shares gained 55 percent in the past 12 months.
Bristol-Myers rose 14 cents, or less than 1 percent, to $26.75 at 4 p.m. in New York Stock Exchange composite trading.
17,000 Cases
Hepatitis C, a chronic disease of the liver, affects about 3.2 million people in the U.S., according to the Atlanta-based Centers for Disease Control and Prevention. Every year, about 17,000 people in the U.S. are infected.
ZymoGenetics also is developing treatments for bone diseases, thrombosis, arthritis, melanoma and multiple sclerosis. It markets Recothrom, a drug to control bleeding in surgery, which generated net sales of $11.9 million in the second quarter, the company said in a filing. ZymoGenetics has licensing deals with German drugmaker Merck KGaA and Bagsvaerd, Denmark-based Novo Nordisk A/S among pharmaceutical companies.
“ZymoGenetics is a leader in advancing novel biologics, particularly genomics-based therapies,” said Elliott Sigal, chief scientific officer of Bristol-Myers, in the statement. “We expect ZymoGenetics’s pipeline and biologics capabilities to complement and enhance our existing efforts in hepatitis C, oncology and immunoscience.”
Challenging Environment
The sale to Bristol-Myers reflects a challenging funding environment for small biotechnology companies, Wade said. ZymoGenetics hasn’t recorded an annual profit since 1999, according to Bloomberg data and company filings.
U.S. drugmakers have announced or completed 200 acquisitions in the past 12 months, with an average value of $1.33 billion including net debt, according to Bloomberg data. The average premium in those deals was 27 percent above the closing price, according to Bloomberg data.
Novo Nordisk, the world’s largest maker of insulin, said it will sell its estimated 26 percent of ZymoGenetics to Bristol- Myers as part of the deal.
“We find the offer from Bristol-Myers Squibb attractive and have entered into an agreement with Bristol-Myers Squibb to support the transaction and tender all of our ZymoGenetics shares in the offer,” Jesper Brandgaard, Novo Nordisk’s chief financial officer, said in a statement.
The acquisition fits Bristol-Myers’s goal of finding new treatments as its existing drugs such as Plavix, the anti- clotting treatment marketed with Sanofi-Aventis SA that is the world’s second-best selling drug, face generic competition, the company said in the statement.
“This acquisition is another example of our strategic, targeted approach to business development,” said Lamberto Andreotti, chief executive officer of Bristol-Myers.
Bristol-Myers said it has purchase agreements from holders of 37 percent of ZymoGenetics’s outstanding shares and expects the tender offer to close in about a month.
To contact the reporter on this story: Drew Armstrong in Washington at darmstrong17@bloomberg.net;
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