Onyx Seeks Suitors After Rejecting $120-a-Share Amgen Bid

Onyx Pharmaceuticals Inc., the maker of the cancer drug Nexavar, said it is in contact with other possible acquirers after rejecting an unsolicited $120-a-share cash takeover bid from Amgen Inc. Onyx shares surged.

Onyx has solicited interest from at least two pharmaceutical companies involved in oncology since Amgen’s offer was reported after the market closed on June 28, according to a person familiar with the matter who asked not to be identified because the discussions were private. Amgen’s bid is 38 percent more than Onyx’s closing price of $86.82 that day.

“We are actively exploring the potential to combine Onyx with another company,” Onyx Chief Executive Officer N. Anthony Coles said yesterday in a statement. The Amgen offer “significantly undervalued” Onyx, according to the statement. Based on shares outstanding, the offer values Onyx at about $10 billion, according to the person familiar with the proposal.

Onyx soared 52 percent to $132.02 at 9:33 a.m. New York time, after earlier reaching $132.98 in the biggest intraday increase since February 2007. The move past Amgen’s offer price suggests investors expect a higher bid, with Phil Nadeau, an analyst with Cowen & Co., suggesting a purchase price of at least $130 a share is probable.

Onyx shares had gained 15 percent this year through June 28. The company rejected the bid that day, according to its statement. Amgen rose 2.9 percent to $101.51 today, and had gained 14 percent this year through June 28.

Rejected Offer

Coles turned down the offer when he talked with Amgen CEO Robert Bradway at about 2 p.m. on June 28, according to a person familiar with the details who also asked not to be identified because the talks were private. Bradway didn’t say it was the company’s final offer and Onyx believes there could be a new bid, the person said.

Onyx reported $362 million in 2012 revenue, with 80 percent coming from two drugs it sells in partnership with Germany-based Bayer AG -- Nexavar, for liver and kidney cancer, and Stivarga for stomach cancer. The South San Francisco, California-based company markets on its own the blood-cancer drug Kyprolis.

“A lot of companies want fully owned cancer assets,” said Mark Schoenebaum, an analyst for ISI Group LLC in New York, in a telephone interview yesterday. “Strategically, Onyx makes sense for a dozen companies or maybe more, so the only issue is going to be price. I put the probability that Onyx is taken out at north of 90 percent.”

No Comment

Ashleigh Koss, a spokeswoman for Thousand Oaks, California-based Amgen, said by telephone yesterday that the company wouldn’t comment. Amgen has been seeking new products and expanding its business overseas as sales decline for its anemia drugs Aranesp and Epogen. The medicines generated about $4 billion in 2012, about 23 percent of the company’s revenue, according to data compiled by Bloomberg.

Onyx’s management sees Amgen’s bid as too low based on high premiums fetched in recent, comparable health-care deals, such as Gilead Science Inc.’s takeover of Pharmasset Inc. announced in 2011, said one of the people familiar with the matter. Gilead valued Pharmasset at 94 percent more than its trailing 20-day average share price at the time, according to data compiled by Bloomberg.

“There’s probably a presumption on Onyx’s part that the first offer from Amgen isn’t the best offer,” said Les Funtleyder, health-care strategist at Poliwogg, a New York investment firm, in a telephone interview. “Biotech valuations have gone up quite a bit, including Amgen’s by the way, which probably makes them more likely to spend.”

Possible Acquirers

Onyx is reaching out to possible acquirers who had previously expressed interest “to determine whether a combination with their company makes sense for us,” said Lori Melancon, an Onyx spokeswoman, in a telephone interview.

“Although we’ve reached out to these companies who have previously expressed interest, that does not signify that the company will be sold,” she said. “We could remain an independent company.”

Melancon wouldn’t say how many companies had expressed interest or identify them. The company has set no deadline or time frame on making a decision, she said.

Bayer spokesman Christian Hartel declined to comment on whether the company will bid for Onyx.

Before Amgen’s offer was reported, Onyx was the 11th-biggest U.S. biotechnology company by market value at about $6.32 billion, according to data compiled by Bloomberg.

Revenue Comparison

By revenue, it’s the 15th-largest, trailing Amgen, Gilead, Biogen Idec Inc. and Celgene Corp., all with annual revenues exceeding $5 billion, as well as mid-sized companies including Regeneron Pharmaceuticals Inc., Vertex Pharmaceuticals Inc., Alexion Pharmaceuticals Inc. and BioMarin Pharmaceutical Inc.

Onyx’s 15 percent gain since the start of the year through June 28 lags behind the 27 percent increase in the Nasdaq Biotechnology Index. The stock rose 72 percent in 2012 as Onyx won approval of Kyprolis, also known as carfilzomib, spurring speculation the company could be acquired.

A deal valuing Onyx at $10 billion would be the fourth-largest acquisition of a biotechnology company in the last three years, according to data compiled by Bloomberg. Since the end of June 2010, 261 biotechnology deals were announced, with an average disclosed size of $628.7 million and an average premium of 45 percent, the data show.

Sanofi’s 2011 purchase of Genzyme Corp. for $20.1 billion was the largest, followed by Thermo Fisher Scientific Inc.’s pending $15.9 billion deal for Life Technologies Corp. this year and Gilead’s 2012 purchase of Pharmasset for $10.6 billion.

For Amgen, the world’s largest biotechnology company by sales, a $10 billion acquisition of Onyx would be its second-largest ever, after its 2001 purchase of Immunex Corp. for $16.8 billion, data compiled by Bloomberg show. Amgen’s next-largest deal was its 2005 acquisition of Abgenix Inc. for $2.21 billion.

(Updates with shares trading in the fourth paragraph.)
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