Onyx Pharmaceuticals Inc. (ONXX) said it is seeking potential
buyers after rejecting an unsolicited acquisition offer from Amgen
Inc. of around $8.7 billion, based on shares outstanding,
potentially setting the stage for a bidding war for the cancer-drug
developer.
Onyx said in a statement that Amgen's offer "significantly
undervalued Onyx and its prospects, and was not in the best
interest of Onyx or its shareholders."
Amgen's bid valued the biotech company at $120 a share, or about
38% more than its closing price Friday of $86.82. Including notes
that convert to equity and stock options, the offer is worth around
$10 billion, according to a person familiar with it.
Amgen declined to comment.
Lori Melancon, an Onyx spokeswoman, said the company had
received indications of interest in the past. That, combined with
Amgen's offer, led the board to authorize the company's financial
adviser to contact other potential acquirers. Onyx has a "fiduciary
responsibility to our shareholders' to explore the possibility of a
merger, she said.
Onyx's principal attraction is its blood-cancer treatment
Kyprolis, a potential blockbuster therapy. One virtue of the drug
is that Onyx doesn't have to share revenue from it with a partner
in most of the world, according to a person familiar with the
matter. But a big global drug company might be able to distribute
Kyprolis more effectively than Onyx could on its own.
Kyprolis could help Amgen offset expected declines for some of
its core assets as they face patent expirations and the possibility
of new generic competition. Amgen's sales force has decades of
experience selling cancer-related drugs like Neulasta, which helps
boost the body's resistance to infection in patients receiving
chemotherapy, said Mark Schoenebaum, an ISI Group analyst.
Acquiring Onyx also could make strategic sense for other large
pharmaceutical and biotechnology companies looking to gain access
to new cancer medications. Such drugs can cost more than $100,000
annually but have faced relatively little resistance from
insurers.
Kyprolis, which was approved in the U.S. last year and which
Onyx is in the process of launching globally, had sales of $64
million in the quarter ended March 31, and could reach nearly $2
billion in annual sales by 2018, according to analysts'
projections.
Among the companies--besides Amgen---for which Onyx could be a
good strategic fit are Pfizer Inc. (PFE) and Bayer AG (BAYRY,
BAYN.XE), as well as big cancer players such as Novartis AG (NVS,
NOVN.VX), Roche Holding AG (RHHBY, RO.EB, ROG.VX) and Celgene Corp.
(CELG).
Pfizer, Bayer and Novartis declined to comment. Roche and
Celgene didn't respond to requests for comment.
Onyx has a collaboration and royalty licensing agreement with
Bayer that allows the German drug giant to share in the profits of
two cancer drugs. It also has rights to an experimental cancer
treatment being developed by Pfizer, the rights to which could be
sold for a hefty profit by any company that purchases Onyx. That's
because the industry's appetite for acquiring royalty streams has
increased recently, Mr. Schoenebaum said.
One of Onyx's agreements with Bayer is for Nexavar, a liver- and
kidney-cancer treatment for which the companies are trying to
expand sales. Onyx reported recently that Nexavar helped to nearly
double the number of months that patients with a rare type of
advanced thyroid cancer lived without their disease worsening.
Patients with treatment-resistant thyroid tumors have no other
treatment options, study investigators said at the time. If Nexavar
is approved it would be the first new drug for this type of thyroid
cancer in 40 years.
If other suitors do emerge, however, it isn't clear whether they
come up with an offer that would be acceptable to Onyx's board.
If Onyx remains independent, "it will be viewed as a strategic
blunder by their investment bankers," Mr. Schoenebaum said.
"However, I don't think that's going to happen."
Until its statement Sunday, Onyx had publicly maintained that it
wanted to remain independent and was looking to expand its own
development pipeline through acquisitions. Onyx is considered one
of the biotechnology sector's most promising companies, even as
research and development costs have kept it from achieving
profitability.
"There is every indication that we should just keep going and
going on our own," N. Anthony Coles, Onyx's chairman and chief
executive, said in a March interview. "We do believe, though, that
the way to build a successful sustainable business is through
acquisition, either companies or products, even licensing
deals."
Over the past 12 months, Onyx shares have traded between $63 and
$101.57. Their value has grown since the approval of Kyprolis last
summer and on the potential for expanded sales of Nexavar.
After the market's close on Friday, Canada's Financial Post
reported details of Amgen's offer, leading Onyx shares to jump more
than 25%, to $109.01 in after-hours trading Friday.
Centerview Partners LLC is acting as financial adviser to Onyx,
and Goodwin Procter LLP is acting as legal adviser.
Subscribe to WSJ: http://online.wsj.com?mod=djnwires