The Wall Street Journal-20080205-Amgen Gets a Lift in Deal With Takeda

Return to: The_Wall_Street_Journal-20080205

Amgen Gets a Lift in Deal With Takeda

Full Text (730  words)

Biotech giant Amgen Inc., hurt by plunging sales of its flagship anemia drug, offloaded some financial risk by striking a licensing deal worth as much as $1.19 billion plus royalties with Japanese drug maker Takeda Pharmaceutical Co.

The deal gives Takeda marketing rights -- in Japan and in Asia -- to 13 products in Amgen's development pipeline.

Amgen has been beset by safety concerns and regulatory rulings that have undercut its anemia drug Aranesp. The deal means that Takeda is picking up some of the near-term research expenses for a share of potential long-term profits on experimental drugs to treat cancer, inflammation and pain.

Under terms of the deal, Takeda also will buy Amgen's Japanese subsidiary Amgen KK, which has 160 employees, for an undisclosed sum. Takeda will not end up with any stake in Amgen Inc. itself, according to Amgen spokesman David Polk.

Amgen Chief Executive Kevin Sharer characterized the deal as capitalizing on the strength of the Thousand Oaks, Calif., company's pipeline, rather than signaling any weakness in its prospects. Amgen stock, which has lost roughly a third of its value over the past year, fell 18 cents to $47.18 yesterday in 4 p.m. Nasdaq Stock Market composite trading.

"We've got more molecules than we can develop," Mr. Sharer said yesterday. "Even spending 22% of our revenues [on R&D] isn't enough to develop everything in Asia, North America and Europe."

Michael Aberman, a securities analyst with Credit Suisse in New York, said the Takeda pact "gives me confidence" in Amgen's management of expenses and profit goals. However, he said management should go further and seek a buyer for the company to maximize the value of potential future products, such as an osteoporosis drug that would be prescribed by primary-care doctors -- a market in which Amgen has little sales experience.

However, Mr. Sharer said he won't undertake any move that compromises Amgen's independence. "Quite the reverse," he said. "We're not signaling any change in strategic intent. It's just a reasonable investment choice" that lets Amgen focus on markets it knows best in Europe and the U.S.

Talks began last summer as Amgen shared its lab notebooks and data with candidate partners in Japan. Takeda emerged as "the most authoritative and capable" ally to drive development in Japan, where regulatory and clinical-trial conduct differs from comparable procedures in the U.S. and Europe.

The deal excludes the most promising product in Amgen's pipeline, the bone-building drug denosumab, or D-mab. Amgen already had agreed to share some Japanese marketing rights for D-mab with another partner, Daiichi Sankyo.

The new pact grants Takeda exclusive rights to develop and commercialize 13 other products in Japan. Takeda's payments to Amgen includes $200 million up front and as much as $340 million to help defray expected world-wide development costs over the next several years, plus $362 million of success-based milestone payments and double-digit royalties on sales in Japan.

The deal includes a global partnership for AMG 706, a novel small- molecule drug that tamps down vessel growth that feeds tumors. For this compound, Takeda will pay Amgen an additional $100 million up front, $175 million more upon meeting certain research milestones and double-digit royalties on any sales in Japan. Outside Japan, the companies would evenly split any future profit on this compound.

Takeda's purchase of Amgen KK is expected to close in March.

Securities analysts took the deal in stride.

"I wouldn't read that much into this deal," said Eric Schmidt of Cowen and Co. "It is relatively modest in terms of financials . . . and products," he said, adding that "Few ascribe much value for any of the products in this transaction."

"I don't think Takeda will end up buying Amgen," Mr. Schmidt said, dismissing any prospect of a merger. "The deal should improve operating performance for the next few years." Amgen said the deal won't affect its 2008 earnings guidance of $4 to $4.30 a share, excluding stock options.

A year ago, Amgen traded near $70 a share until the impact of anemia-drug safety concerns -- including a heightened risk of cardiovascular problems and progression of certain cancers -- eroded the company's stock price by roughly a third. Next month, Amgen returns to Washington to face the oncology-drugs advisory committee of the Food and Drug Administration, as the agency tries to determine the extent of anemia-drug risks and limits to safe use.