$7 Billion Amylin Buyout Boosts BMS, AZ Diabetes Partnership
This article was originally published in The Pink Sheet Daily
Executive Summary
The creatively structured deal adds Amylin’s GLP-1 franchise and other assets to the two pharmas’ diabetes portfolio.
It wasn’t long after rumors surfaced of Bristol-Myers Squibb Co.’s offer to buy diabetes specialist Amylin Pharmaceuticals Inc. that AstraZeneca PLC’s dealmakers picked up the phone and called their counterparts at BMS. Three months later, BMS is buying Amylin in an unusual, risk-sharing $7 billion deal that sees AstraZeneca acquiring 50% of the business and the pharmas adding Amylin’s products to their existing diabetes collaboration.
The companies announced the deal late in the evening of Friday, June 29. BMS is paying Amylin $31 per share, or $5.3 billion, and $1.7 billion to cover outstanding debt and a contractual payment obligation to previous marketing partner Eli Lilly & Co. (Also see "Amylin, Lilly End Exenatide Tie-Up, Marking End To Litigation" - Pink Sheet, 8 Nov, 2011.). The price is a modest 10% premium over Amylin’s closing valuation on Friday, but more than doubles the company’s $15.39 per-share value prior to BMS’ initial $22/share offer, as reported by Bloomberg News March 28 (Also see "Weeks After Bydureon Launch, Amylin Looks Like A Takeout Target" - Pink Sheet, 28 Mar, 2012.). AstraZeneca is in turn paying more than $3.4 billion to BMS for a 50/50 stake in the assets, and also has the option, upon completion of the deal, to pony up an additional $135 million to “establish equal governance rights over key strategic and financial decisions regarding the collaboration,” according to the release announcing the deal.
When the Amylin story started to unfold in late March, AZ reached out to BMS to propose making a joint effort at acquiring the biotech, AstraZeneca VP Strategic Planning and Business Development Shaun Grady said in an interview. Initial business development discussions quickly rose to the chief executive level and the companies agreed in principle to take a joint approach, “but that Bristol would be in the driver’s seat,” said Grady. “If we were going to be successful in what was going to be a competitive, intense, and quick process, it was important that one company was going to take the lead. But we’d have complete transparency” and conduct joint due diligence and make judgments together, he said.
Risk-sharing deal structures have proliferated throughout industry as one response to the high risks associated with drug discovery and development. In an early example of the genre, in January 2007, BMS sold to AZ a 50% stake in the then-Phase III DPP-4 inhibitor saxagliptin and dapagliflozin, a Phase II sodium glucose co-transporter type 2 (SGLT-2) inhibitor (Also see "BMS Deals Diabetes Drugs, Solidifies Specialist Stance" - In Vivo, 1 Feb, 2007.). Saxagliptin is now sold in the U.S. and Europe as Onglyza (and in combination with metformin as Kombiglyze) and the companies continue to develop dapagliflozin, which was rejected by FDA in January 2012 (Also see "Dapagliflozin Faces Ominous Prospect Of New Trials" - Pink Sheet, 19 Jan, 2012.).
The new deal can be viewed through a similar risk-sharing lens, though the risk here is largely commercial. Amylin adds the original glucagen-like peptide-1 agonist Byetta (exenatide) to the AZ/BMS diabetes portfolio, along with the new once-weekly version of exenatide, Bydureon, and the life-cycle management apparatus around that franchise. Bydureon, successfully launched earlier this year, is hoped to stem the loss of revenue to Novo Nordisk AS’s competing Victoza (liraglutide) once-weekly GLP-1. Other late-stage GLP-1s from large players GlaxoSmithKline PLC, Sanofi, and Lilly will further increase competition in the coming months and years (Also see "Diabetes Leaders Lilly, Sanofi Give A Glimpse Of GLP-1 Strategy" - Pink Sheet, 13 Jun, 2012.).
Beyond the GLP-1 franchise, BMS and AstraZeneca add the marketed Symlin (pramlintide), a production facility, and Amylin’s pipeline. Those product candidates include metreleptin, a leptin analogue under review by FDA for treatment of lipodystrophy in a subset of patients. Takeda Pharmaceutical Co. Ltd. last year halted development of a combination Symlin/metreleptin therapy in obesity (Also see "Takeda/Amylin's Pramlintide/Metreleptin Combo Becomes The Latest Obesity Casualty" - Scrip, 8 Aug, 2011.).
A New Model For Sharing The Load?
The deal between Bristol and AZ represents a new twist in risk-sharing deals, and one that wasn’t without difficulty. “It was in our sweet spot, so it was worth the extra effort and the extra complexity,” says Grady, and had one of the parties done the deal independently – as BMS had reportedly sought to do – it may have put a strain on the existing BMS/AZ partnership.
The parties were “thoughtful, careful, and transparent” with Amylin about their decision to work and negotiate as a unit, he said.
Though Grady suggests it wouldn’t have been impossible for the companies to pursue a deal like this without the prior relationship, that precedent certainly helped; “the existing agreement gave us the framework,” he said. Through expanding the deal, “we’ve proven that you can do something of this scale on a joint basis and share risk so that the reward you share is bigger than either company could achieve independently,” he said. That said, “there were lots of extra calls and interactions” compared to the way a more traditional agreement comes together, but getting the deal done “validated our ability to work together collaboratively.”
Though novel the deal wasn’t entirely without precedent at AZ. In December 2009, the big pharma acquired anti-infectives play Novexel for $430 million, plus earn-outs. But nearly half of that outlay was instantly recouped, as Forest Laboratories Inc. paid AZ $210 million for additional rights to one of the biotech’s lead compounds (Also see "AstraZeneca Takes Out Antibiotic Firm Novexel, With Cash Back from Forest" - Pink Sheet, 23 Dec, 2009.).