NEW YORK – Amgen Inc. said on Monday it plans to buy smaller rival Immunex Corp., maker of rheumatoid arthritis drug Enbrel, for about $16 billion in cash and stock in the largest-ever biotechnology merger.
The deal, which sources disclosed late last week, would create a $72 billion biotechnology behemoth with added research strength and the financial muscle to buy late-stage development drugs from competitors.
However, Immunex has suffered significant setbacks to its pipeline of experimental medicines this year, making the Seattle company less attractive than it was at the start of 2001.
In March, the company said tests of Enbrel in chronic heart-failure patients had not proved effective, eliminating a potentially lucrative application for the drug. In addition, it said its Nuvance asthma treatment showed no apparent benefit in opening up lung airways.
Still, Amgen would gain Immunex's wildly popular Enbrel, as well as experimental treatments for asthma and various forms of cancer.
Analysts expect Amgen, which recently received U.S. regulatory approval to sell rheumatoid arthritis treatment Kineret, to build a sales force that would specialize in the debilitating joint disorder and that could sell the new drug and Enbrel.
TERMS OF THE DEAL
Thousand Oaks, California-based Amgen would pay about $30 per share for Immunex, about 17 percent more than Friday's closing price and nearly 23 percent more than the closing price on Wednesday, the day before word of a possible deal leaked out.
The deal calls for the exchange of each Immunex common share for 0.44 of an Amgen common share and $4.50 in cash, or a total of 85 percent in stock and 15 percent in cash.
Last week, when it was believed the acquisition would be worth $18 billion, analysts feared Amgen would be paying too much for Immunex. Investors also expressed concern that the purchase would hurt the company's earnings for years to come and sent Amgen stock down to $56.03 on Friday, a 13 percent drop from Wednesday's close.
Amgen said on Monday the deal would be dilutive in 2003 at less than 5 percent and add to 2004 results on a ``cash'' earnings-per-share basis. A company official could not immediately say the extent that the deal would dilute 2002 earnings.
Amgen, which makes anti-anemia blockbuster Epogen and infection-fighter Neupogen, said it expects to post pro forma 2002 revenues of about $5.5 billion and net income above $1.5 billion. The company estimated ``cost synergies'' of more than $200 million in 2003 and more than $250 million in 2004.
ENBREL SALES BOOST SEEN
``This is a compelling strategic transaction and an excellent opportunity for the shareholders, employees and partners of both companies,'' Amgen Chairman and Chief Executive Kevin Sharer said in a statement, ``and we expect it will generate significant benefits for hundreds of thousands of patients around the world.''
As a result of the merger, annual sales of Enbrel will probably reach $3 billion or more by 2005, Amgen estimated.
Manufacturing constraints have hampered Enbrel sales, and demand has exceeded supply. Sales of the drug rose 19 percent to $545.6 million in the first nine months of 2001 from a year earlier.
Amgen said it hopes to use Enbrel to help accelerate its five-year annual percentage sales growth rate to the low 30s from low 20s.
Drug giant American Home Products Corp., which owns about 41 percent of Immunex, has agreed to vote in favor of the merger, the companies said.
``We are very pleased with today's announcement by Amgen and Immunex,'' said American Home President and Chief Executive Robert Essner. ``Amgen shares our belief in the huge potential of Enbrel in the robust and growing inflammation market.''
American Home would own about 8 percent of the enlarged Amgen.