Amgen’s unsolicited proposal to acquire Onyx Pharmaceuticals for $120 per share in cash, or about $10 billion, has been rejected, the latter confirmed on Sunday. Onyx noted that its Board of Directors evaluated the offer made by Amgen, which marked a 38-percent premium over the company’s recent closing price, but concluded that the price proposed by Amgen significantly undervalued Onyx and its prospects and was therefore not in the best interest of Onyx or its shareholders.
Documents reviewed by The Economic Times last week stated that Amgen was prepared to "move quickly to negotiate and execute a combination with [Onyx]" and that the proposal did not have financing conditions on it. The news sent shares in Onyx up as much as 28 percent.
"Strategically, this deal makes a great deal of sense for Amgen," remarked ISI Group analyst Mark Schoenebaum, adding that "Amgen already has a very large cancer franchise. However, none of these drugs are direct anti-tumour agents." Bloomberg noted that Amgen has been seeking new products and expanding its business overseas as sales decline for its anaemia drugs Aranesp (darbepoetin alfa) and Epogen (epoetin alfa), which generated about $4 billion in 2012, or about 23 percent of the company’s revenue.
However, based upon expressions of interest received from other third parties and the recent proposal from Amgen, Onyx’s Board has authorised its financial advisor to contact potential acquirers who may have an interest in the drugmaker. "We are actively exploring the potential to combine Onyx with another company as an option to create additional value for Onyx shareholders," noted Onyx CEO N. Anthony Coles. Onyx spokeswoman Lori Melancon added that the drugmaker has a "fiduciary responsibility to our shareholders" to explore the possibility of a merger.
"The hottest area right now of acquisitions are fully owned oncology drugs, and those are scarce," Schoenebaum noted, adding that "strategically, there could be a dozen companies interested." These companies are said to include Pfizer, which is developing an experimental cancer treatment for which Onyx holds the rights and could be sold for a profit by the acquiring company, as well as Bayer, which has a collaboration and royalty licensing agreement with Onyx under which the two companies share profits of two cancer drugs. Other drugmakers potentially interested in making a takeover offer may include Roche and Celgene. If Onyx remains independent, "it will be viewed as a strategic blunder by their investment bankers," Schoenebaum remarked, but noted that "I don't think that's going to happen." Deutsche Bank analyst Robyn Karnauskas speculated that Onyx could be bought for between $140 and $148 a share.
Looking ahead, Onyx indicated that it does not intend to communicate further regarding the Amgen proposal or the process by which it will consider other proposals. The drugmaker also indicated that there can be "no assurance that an improved proposal will be made by Amgen or any other entity…or that any transaction will be approved or consummated."