The Health Care M&A Monthly: Amylin Gets Bid Up

Bristol-Myers Squibb Finishes What It Started In February
Hindsight always helps, but it looks like the board of Amylin (NASDAQ: AMLN) had it right when they rejected the unsolicited bid from Bristol-Myers Squibb (NYSE: BMY) last February for $22.00 per share.  It was a decent premium of nearly 100% above AMLN’s price before it announced the results of its new diabetes drug treatment, but there is nothing like a little competition to drive a price up. And there’s nothing like having a new drug treatment for one of the fastest growing diseases in the world, with nearly 300 million people suffering from diabetes worldwide, and growing, especially in the U.S. where there are estimates that 10% of the population suffers from it.
The competition was obviously not going to let BMY walk away with Amylin without a fight, and the likes of Merck (NYSE: MRK), Pfizer (NYSE: PFE), AstraZeneca (LSE: AZN), Roche Holding AG (VX: ROG),  Takeda Pharmaceutical (T: 4502) and Novartis (NYSE: NVS) all had a chance.  And their involvement in the process was a major reason why the price was bid up to $31.00 per share, which was almost 50% above BMY’s original offer.  Including the assumption of debt plus a $1.7 billion contractual payment to Ely Lilly & Company (NYSE: LLY), the deal value ended up at about $7.0 billion, or 11.4x annualized first quarter revenues.  Amylin has still not turned a profit, so there was no EBITDA multiple. That, however, may soon change  with its new diabetes treatment, but not soon enough to make this acquisition accretive to BMY until sometime in 2014, and only marginally so.
The most unusual aspect of the transaction is that BMY teamed up with AstraZeneca to consummate the deal, with ANZ essentially paying BMY $3.4 billion in cash to be a partner in Amylin and its new drugs.  BMY and AZN will enter into collaboration agreements whereby they will develop AMNL’s portfolio of products and share equally in profits and losses from the collaboration, with mostly losses for at least a year. No one can quite remember when or if something like this has ever happened with a major pharmaceutical company acquisition. More typical might be two companies dividing up the assets, or certain drug portfolios more suited to each company’s area of specialization, rather than working together and “sharing” everything.
But since the two companies were already collaborating in diabetes research, perhaps it should not have been a surprise.  That collaboration, however, has not been overly successful so far, as one of its diabetes products failed to win U.S. marketing approval early this year (more information required), despite the fact that the treatment, being developed with AZN, has already been approved in Europe.
What sparked the interest in Amylin, and the subsequent bidding war, was after AMNL won approval early this year to sell Bydureon, a treatment for Type 2 diabetes that has to be injected only once a week.  Its leading diabetes drug had been Byetta, but it has to be injected twice a day and annual sales have slipped more than 20% in two years to just over $517 million in 2011. Amylin has another drug to treat both Type 1 and Type 2 diabetes, but its sales are barely topping $100 million. Fortunately, the Gila monster is not about to become extinct since a hormone from its saliva is used to make both Bydureon and Byetta………..Want to read more? Click here for a free trial to The Health Care M&A Information Source and download the current issue today