‘undervalued’
Drugmaker looking for suitors
Onyx shares surge after drugmaking company rejects Amgen deal.
Onyx Pharmaceuticals Inc., the maker of the cancer drug Nexavar, said it is in contact with other possible acquirers after rejecting an unsolicited US$120-a-share cash takeover bid from Amgen Inc. Onyx shares surged.
Onyx has solicited interest from at least two pharmaceutical companies involved in oncology since Amgen’s offer was reported after the market closed on June 28, according to a person familiar with the matter who asked not to be identified because the discussions were private. Amgen’s bid is 38% more than Onyx’s closing price of US$86.82 that day.
“We are actively exploring the potential to combine Onyx with another company,” Onyx chief executive Anthony Coles said yesterday in a statement. The Amgen offer “significantly undervalued” Onyx, according to the statement. Based on shares outstanding, the offer values Onyx at about US$10billion, according to the person familiar with the proposal.
The Financial Post reported the offer on Friday, sparking a steep jump in Onyx shares in after-hours trading.
Onyx soared 51% to close at US$131.33 on the Nasdaq Monday, after earlier reaching US$132.98 in the biggest intraday increase since February 2007. The move past Amgen’s offer price suggests investors expect a higher bid, with Phil Nadeau, an analyst with Cowen & Co., suggesting a purchase price of at least US$130 a share is probable.
Onyx shares had gained 15% this year through June 28. The company rejected the bid that day, according to its statement. Amgen fell 1% to close at US$97.49 Monday, and had gained 14% this year through June 28.
Mr. Coles turned down the offer when he talked with Amgen CEO Robert Bradway at about 2 p.m. on June 28, according to a person familiar with the details who also asked not to be identified because the talks were private.
Mr. Broadway didn’t say it was the company’s final offer and Onyx believes there could be a new bid, the person said.
Onyx reported US$362-million in 2012 revenue, with 80% coming from two drugs it sells in partnership with Germany-based Bayer AG — Nexavar, for liver and kidney cancer, and Stivarga for stomach cancer. The South San Francisco-based company markets its own blood cancer drug, Kyprolis.
“A lot of companies want fully-owned cancer assets,” said Mark Schoenebaum, an analyst for ISI Group LLC in New York, in a telephone interview yesterday. “Strategically, Onyx makes sense for a dozen companies or maybe more, so the only issue is going to be price. I put the probability that Onyx is taken out at north of 90%.”
Ashleigh Koss, a spokeswoman for Thousand Oaks, Calif.- based Amgen, said by telephone Sunday that the company wouldn’t comment. Amgen has been seeking new products and expanding its business overseas as sales decline for its anemia drugs, Aranesp and Epogen. The medicines generated about US$4-billion in 2012, about 23% of the company’s revenue, according to data compiled by Bloomberg.
Onyx’s management sees Amgen’s bid as too low based on high premiums fetched in recent, comparable healthcare deals, such as Gilead Science Inc.’ s takeover of Pharmasset Inc. announced in 2011, said one of the people familiar with the matter. Gilead valued Pharmasset at 94% more than its trailing 20-day average share price at the time, according to data compiled by Bloomberg.
“There’s probably a presumption on Onyx’s part that the first offer from Amgen isn’t the best offer,” said Les Funtleyder, health-care strategist at Poliwogg, a New York investment firm, in a telephone interview. “Biotech valuations have gone up quite a bit, including Amgen’s by the way, which probably makes them more likely to spend.”
Onyx is reaching out to possible acquirers who had previously expressed interest “to determine whether a combination with their company makes sense for us,” said Lori Melancon, an Onyx spokeswoman, in a telephone interview.
“Although we’ve reached out to these companies who have previously expressed interest, that does not signify that the company will be sold,” she said. “We could remain an independent company.”
Ms. Melancon wouldn’t say how many companies had expressed interest or identify them. The company has set no deadline or time frame on making a decision, she said.
Bayer spokesman Christian Hartel declined to comment on whether the company will bid for Onyx.
Before Amgen’s offer was reported, Onyx was the 11th-biggest u.S. biotechnology company by market value at about US$6.32-billion, according to data compiled by Bloomberg. By revenue, it’s the 15th-largest.