Health Care Deal News: Spotlight on Biotechnology- May 2012

In April’s largest Biotechnology deal, the British-Swedish pharmaceutical company AstraZeneca plc (NYSE: AZN) is acquiring Ardea Biosciences (NASDAQ: RDEA), a biotech that is focused on the discovery and development of small-molecule therapeutics treating gout and cancer. On a trailing 12-month basis, it generated revenue of $7.3 million and a net loss of $86.6 million. AZN is offering to pay $32.00 per share, or a total of $1.26 billion. This bid offers RDEA shareholders a 54% premium to the stock’s prior-day price. Given the low level of current revenue, calculating acquisition multiples makes little sense.  It expands AZN’s portfolio with a robust drug pipeline of small- molecule drugs. Its lesinurad candidate for treating chronic gout is in phase 3 trials; it may be an alternative for patients who are intolerant of such existing gout treatments as allopurinol.

AstraZeneca also entered into a smaller deal with Amgen (NASDAQ: AMGN) to jointly develop and commercialize five monoclonal antibodies from AMGN’s inflammation portfolio, which include AMG 139, AMG 157, AMG 181, AMG 557 and brodalumab (aka, AMG 827). AZN is making a $50.0 million one-time payment; apart from this, both companies are to share both costs and profits. It is believed that this collaboration will accelerate the development of these five compounds. AZN will lead the development of AMG 139, AMG 157 and  AMG 181 while AMGN will lead the development of brodalumab and AMG 557.
GlaxoSmithKline plc (NYSE: GSK) is entering into a strategic alliance with South San Francisco-based Five Prime Therapeutics to use Five Prime’s platforms in up to six programs to identify agents and mechanisms relevant to refractory asthma and COPD. Under terms of the deal, GSK will pay $30.0 million in an upfront fee, and up to $193.5 million in option exercise fees and milestone payments for each product resulting from a selected program. Assuming that they collaborate on all six programs, the total value of the deal is $1.164 billion. Tiered royalties on sales of products emerging from these programs are also stipulated in the deal. This alliance enlarges GSK’s pipeline for therapeutics to treat respiratory diseases and disorders. Five Prime will identity and validate potential drug targets and drug candidates. GSK has an option to exclusively license selected targets discovered by Five Prime. For a majority of the targets, GSK would take on sole responsibility to the further development of the drugs; for a limited number of targets, Five Prime would have an opportunity to advance biologic products through human proof-of-mechanism clinical studies.

Glaxo recently made an unsolicited bid of $13.00 per share in cash to acquire Human Genome Sciences (NASDAQ: HGSI). The total value of the deal is approximately $2.6 billion, and GSK’s bid offers HGSI shareholders an 81% premium to its prior-day price. HGSI rejected the offer, but then authorized a committee to explore the company’s strategic alternatives. It has retained Goldman Sachs and Credit Suisse to assist in this process. Some believe that HGSI would bite if GSK raised its offer to $15.00 per share. And the markets seem to concur. Since the announcement, shareholders have pushed the price as high as $14.71 per share..............Want to read more? Click here for a free trial to The Health Care M&A Information Source and download the current issue today