Amgen Inc., the world’s largest biotechnology company, agreed to buy Micromet Inc. in a $1.16 billion deal to gain an experimental leukemia drug.
Investors of Micromet, based in Rockville, Maryland, will get $11 a share, the companies said in a statement today. The acquisition will give Thousand Oaks, California-based Amgen the compound blinatumomab, being tested against two blood cancers, acute lymphoblastic leukemia and non-Hodgkin’s lymphoma.
While Amgen spends $2.7 billion a year on research and development, the company has “a fairly empty pipeline” and needs to acquire to gain promising new products, said Geoffrey Porges, an analyst for Sanford C. Bernstein in New York.
“This isn’t the end of the acquisitiveness” for Amgen, Porges said in a telephone interview. “This is consistent with Amgen’s ‘swing for the fences’ worldview, and is consistent with both the opportunity and perils of that view.”
Micromet rose 32 percent to $10.94 in New York trading. The biotechnology company gained 60 percent in the last 12 months. Amgen fell 1.6 percent to $68.08, and has climbed 21 percent in the last year.
Porges declined to ascribe a value to blinatumomab until he’s seen the results of current phase 2 trials.
The next set of data for blinatumomab is expected at the American Society of Clinical Oncology’s annual meeting in June 2011, wrote Robyn Karnauskas, an analyst for Deutsche Bank Securities in New York, in a note to investors.
It’s unclear whether the drug will receive accelerated approval from the Food and Drug Administration, wrote Karnauskas, saying the acquisition is outside Amgen’s “core expertise” area.
In a June trial, nine of 12 patients on blinatumomab reached complete remission from acute lymphoblastic leukemia, a cancer that affects about 5,760 people in the U.S. each year.
The purchase fits into Amgen’s strategy to develop new means to kill tumors, Roger Perlmutter, head of research and development, said in a telephone interview today.
“The Micromet team has done a fantastic job of building this platform, which basically takes the existing cytotoxic T-cells that exist in all of us, that are the most powerful killing cells in our immune system, and redirects them to kill tumor cells,” Perlmutter said. “They’ve exemplified that with blinatumomab.”
Partners on Targets
Amgen partnered with Micromet in July to apply the company’s technology to as many as three targets. Micromet is also partnered with other drugmakers, and Perlmutter said Amgen will “support all of the existing partnerships.”
Meanwhile, Amgen will continue to look for other acquisition possibilities, he said.
“We’re always looking for new opportunities, but let’s be clear: blinatumomab is a rare asset,” Perlmutter said. “Finding a company that has both a rare asset like this and also a platform that is potentially generalizable to other tumors, this is extremely unusual.”
Micromet is unlikely to get a higher offer from another bidder, said Jason Kantor, an analyst with RBC Capital Markets in San Francisco.
“The deal is good for Micromet,” Kantor wrote in a research note today. “The path through pivotal trials, FDA approval, and launch would have required dilutive financing and/or a partnership. The cash acquisition monetizes the opportunity up front, and we believe it is good for investors.”
The Amgen offer values Micromet at about 31 times revenue, according to data compiled by Bloomberg. That compares with a median of about 6.7 for almost 40 comparable deals since 2007.
There have been more than 260 U.S. takeovers in Micromet’s industry over the past five years, with the largest being Roche Holding AG’s $47 billion purchase of Genentech Inc. in 2009, according to data compiled by Bloomberg.
The acquisition will be discussed in more detail on a conference call scheduled after fourth-quarter earnings are released when the market closes today, Amgen said in the statement.
Amgen, with a market value of $60.6 billion, declared its first quarterly dividend last year, and announced a $10 billion buyback program, promising to return more value to stockholders.
Amgen’s largest deal in the past five years until now was its $425 million purchase of BioVex Group Inc. in 2010 for its experimental cancer drugs. One of the BioVex drugs, Oncovex for skin cancer, is in late-stage testing along with trebananib, for ovarian cancer, and ganitumab, a therapy for pancreatic cancer, according to data collected by Bloomberg.
Moelis & Co. provided financial advice to Amgen, while Sullivan & Cromwell LLP supplied legal counsel. For Micromet, Goldman Sachs Group Inc. and Cooley LLP acted as financial and legal advisers, respectively.