Amgen, Onyx megadeal?

Based on documents seen by

the Financial Post, it seems that the stage is being set for further consolidation in the life sciences sector. According to those documents,

California-based Amgen Inc. (market cap of uS$75-billion) is interested in acquiring its fellow California-based

Onyx Pharmaceuticals (market cap of uS$6.2-billion.)

“I feel a timely combination of our organizations would be very complementary,” said a letter written by Amgen to Onyx two weeks back, one day after a meeting between senior executives of the two companies.

“I am impressed with the progress you have made with the launch and ongoing development of Kyprolis,” added the letter. Kyprolis is a drug that is used in the treatment of a form of cancer known as multiple myeloma. It is not cheap: according to a July 2012 report, it costs uS$9,950 for 28 days.

In the material sent to Onyx, Amgen said that it “would propose an acquisition of Onyx by Amgen for uS$120 in cash for each share of Onyx.” At uS$120 a share, the proposed price represented a 34% premium to Onyx’s closing share price. Given that that Onyx has almost 84 million shares outstanding on a fully diluted basis, that proposal would cost Amgen about uS$10-billion.

And Amgen indicated it was prepared to “move quickly to negotiate and execute a combination with you,” adding that the proposal “is not subject to any financing condition.”

In its letter, Amgen said that it wants some time for due diligence. “Although we have reviewed Onyx extensively, our review has been limited to publicly available information. We would propose a focused, confirmatory due diligence and document review period.”

Amgen argues that the proposal would also not be subject to any antitrust matters. In its letter, Amgen says, “we have concluded that the proposed transaction would not encounter any significant or other regulatory issues.”

Of course, Amgen added some usual caveats. “Our proposal to acquire Onyx is subject to the negotiation of mutually satisfactory definitive agreements containing customary terms and closing conditions, completion of appropriate due diligence and final Amgen board approval,” states the letter.

So what’s the state of play and will Amgen be able to gain from the socalled first mover advantage?

Sources have indicated that if and when the matter of Amgen’s potential interest in Onyx emerges, then a slew of other potential buyers would enter the fray. The reason: Onyx is now in play and hence represents a possible acquisition target.

And in a world of Big Pharma, all sorts of possibilities could emerge. Sources have indicated Swiss-based F. Hoffman-Laroche AG; u.S.-based eli Lilly & Co.; Germany’s Bayer AG; Japan’s Takeda Pharmaceutical Co. Ltd.; u.S.-based Bristol-Myers Squibb; u.S. based Baxter International., and Paris-based Sanofi could be among the interested parties.

According to its website, “Amgen discovers, develops, manufactures and delivers innovative human therapeutics.” For its part, Onyx defines itself as “a global biopharmaceutical company engaged in the development and commercialization of innovative therapies for improving the lives of people with cancer.”

Amgen said that “we don’t provide comment on market rumour and speculation” while Onyx said “it doesn’t comment on rumours and speculation.”

Financial Post bcritchley@nationalpost.com