Bristol-Myers Squibb Co. agreed to pay $5.3 billion to acquire former Eli Lilly and Co. partner Amylin Pharmaceuticals Inc., a maker of diabetes therapies, as it seeks to replace revenue from its top-selling blood thinner that’s facing generic competition.
Bristol-Myers will pay $31 a share cash, or a 10-percent premium to Amylin’s closing price Friday, according to a statement from the companies. As part of the deal, AstraZeneca Plc will pay Bristol-Myers $3.4 billion to enter into a partnership to develop Amylin’s drug portfolio.
Pharmaceutical companies lost patent protection to products worth $34 billion in annual sales last year, and revenue at risk from generics will rise to $147 billion by 2015, according to data compiled by Bloomberg. Bristol-Myers has been seeking new products to replace revenue from its top seller, the blood thinner Plavix, which began facing generic competition in May after generating $7.1 billion in sales last year.
“It doesn’t make sense to me that someone’s going to pay this ginormous premium for Amylin,” Michael King, an analyst at Rodman & Renshaw in New York, said Friday in a telephone interview before the deal was announced. “The desperation of big pharma is the best thing Amylin has going for itself.”
Amylin began seeking suitors after rejecting a $22-a-share offer from New York-based Bristol-Myers in February, people familiar with the matter said earlier this year. AstraZeneca, Sanofi, and Merck & Co. also made offers during a bidding process, people with knowledge of the process had said.
The boards of Bristol-Myers and Amylin endorsed the deal, and Amylin’s board recommended shareholders tender their stock, Friday’s statement said. The deal is valued at about $7 billion, which includes Amylin’s debt and a payment to Indianapolis-based Lilly of about $1.7 billion.
Amylin was advised by Credit Suisse Securities LLC. Goldman Sachs & Co. Citigroup Inc. and Evercore Partners Inc. are serving as financial advisers to Bristol Myers. Bank of America Merrill Lynch advised AstraZeneca.
Amylin closed 0.6 percent higher at $28.20 per share. The San Diego-based company’s shares were at $15.88 on March 26, the day before it was reported Bristol-Myers had made an unsolicited offer of $22 a share. Bristol-Myers gained 2.5 percent Friday to end the session at $35.95.
Amylin had been seeking a partner to help market Bydureon, its once-weekly version of Byetta, outside the U.S. The company ended in November a decade-long deal with Lilly, which is developing a product with Boehringer Ingelheim GmbH that may compete with Amylin’s drugs.
“We are pleased to be able to strengthen the portfolio we have built to help patients with diabetes by building on the success Amylin has had with its GLP-1 franchise,” Bristol-Myers Chief Executive Officer Lamberto Andreotti said in the statement.
About 346 million people in the world have diabetes, and the number of deaths from the chronic disease may double from 2005 to 2030, according to the World Health Organization.
Revenue at Amylin surpassed $650 million last year and may rise about 5 percent in 2012, according to analysts’ estimates compiled by Bloomberg. The company may generate as much as $1.5 billion in annual sales from the diabetes treatments, according to Phil Nadeau, an analyst with Cowen & Co. in New York.
Bristol-Myers’s and AstraZeneca will equally share profits and losses in the venture to develop Amylin’s drug portfolio.
“There will be an expansion of a diabetes alliance we have had with AstraZeneca,” Jennifer Fron Mauer, a spokeswoman for Bristol-Myers, said in a telephone interview. “We’ve had that since 2007 to co-develop and co-commercialize two Type II diabetes medicines in our pipeline.”
AstraZeneca, whose CEO David Brennan retired June 1, was thought to make most sense as a potential acquirer of Amylin, according to Rodman & Renshaw analyst King. Its Seroquel medicine lost U.S. patent protection in March. Analysts expect the antipsychotic drug’s sales to drop to $3.27 billion this year from $5.82 billion last year, according to data compiled by Bloomberg.
“AstraZeneca has been in a world of hurt,” King said in an interview before the Bristol-Myers deal for Amylin was announced. “Brennan lost his job because of his inability to refresh the pipeline from all the generic competitors.”
Carl Icahn, the billionaire investor who is Amylin’s third-largest shareholder with a stake of almost 9 percent as of April 4, threatened a proxy fight in April and urged a sale, calling the company’s board “dysfunctional” and “not operating in a manner that enhances shareholder value.”