Amgen's Purchase of Cancer Drugmaker Biovex May Mean More Deals Are Coming

Amgen Inc.’s purchase of Biovex, the maker of an experimental cancer vaccine, for as much as $1 billion may signal more deals that aim to push the biotechnology company deeper into tumor treatment.

The acquisition gives Amgen, based in Thousand Oaks, California, an experimental vaccine that’s designed to stimulate the body’s immune system to kill skin cancer cells. Amgen’s efforts in cancer care now are focused largely around drugs that offer support care to cancer patients, such as Neulasta, used to boost infection-fighting cells in patients getting chemotherapy.

While the purchase of Woburn, Massachusetts-based Biovex, the biggest in seven years for Amgen, will cut into 2011 profits, it has the potential to pay off within a few years, said Michael Yee, an analyst with RBC Capital markets in San Francisco.

“It’s high risk, high reward,” Yee said yesterday in a telephone interview. “It’s a call option on a late-stage, potential blockbuster drug for Amgen.”

Amgen, the world’s largest biotechnology company, has announced seven acquisitions in the last five years with an average disclosed size of $264.2 million, according to data compiled by Bloomberg. The company said yesterday it will pay closely held Biovex $425 million upfront and as much as $575 million if its drugs advance.

Amgen yesterday reported $17.4 billion in cash and marketable securities as of Dec. 31. It may spend some of that to “grow the company by making intelligent acquisitions,” Chief Executive Officer Kevin Sharer said yesterday in a conference call with analysts.

Final Stage Testing

Biovex’s Oncovex is in the final stages of testing usually required for U.S. regulatory approval, for the treatment of metastatic melanoma, a skin cancer. The drug also is being studied in head and neck cancer, Amgen and Biovex said in a statement announcing the deal.

About 68,130 new cases of melanoma were diagnosed this year in the U.S. and 8,700 people died from the disease, according to the National Cancer Institute.

“We have a belief that if you don’t invest money in R&D you can’t succeed in this business,” Sharer said during his call. “Investing doesn’t guarantee anything but not investing will put you in a pretty bad spot.”

Yee said investors would support a strategy of more purchases to bolster drug development.

“One should expect Amgen to continue to make further in- licensing pipeline deals for the rest of the year,” he said.

Quarterly Profit Rises

Amgen yesterday also reported that fourth-quarter profit increased 9.8 percent from a year earlier on rising sales of its top two drugs and lower tax expenses.

Net income rose to $1.02 billion, or $1.08 a share, the company said in a statement. Excluding certain costs, earnings of $1.17 per share beat the $1.11 average estimate of 23 analysts surveyed by Bloomberg.

Amgen’s fourth-quarter revenue rose 1 percent to $3.84 billion from $3.81 billion in the period a year earlier.

Sales of Amgen’s best-selling drug Enbrel, for rheumatoid arthritis, rose three percent to $939, while Neulasta revenue rose to $918 million from $876 million. Aranesp, used by patients with kidney disease or undergoing chemotherapy, fell 2.3 percent to $633 million.

The Biovex acquisition takes Amgen “in a completely new direction because it brings to Amgen the first, and to our mind, most advanced immune therapeutic directly specifically at cancer,” said Roger M. Perlmutter, Amgen’s executive vice president for research and development, in a telephone interview yesterday. “By acquiring Biovex we’re continuing the transformation of Amgen into a company that supports therapeutic oncology as well as supportive care oncology.”

To contact the reporter on this story: Rob Waters in San Francisco at rwaters5@bloomberg.net.

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net.

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