|Amgen CEO Robert Bradway|
Now that the ink is dry on Amgen's ($AMGN) $10.4 billion deal for Onyx Pharmaceuticals ($ONXX), the price assessments are rolling in. Consensus? It's a good thing Amgen has an ex-investment banker for a CEO--because Robert Bradway negotiated a bargain.
After all, the negotiated price was $125 per share, just $5 more than Amgen's initial bid. Ahead of the announcement, the price was pegged at $130. And early on, bullish Onyx supporters were talking up a $150-per-share offer. Investors cheered the final offer by pumping up Amgen shares to $113.75 yesterday, a gain of about 8%. And in an oblique comment on Amgen's dealmaking, at least one law firm was out trolling for Onyx shareholders disappointed by the price for a potential class action suit.
Analysts and other market watchers credited a couple of factors for the reasonable price: Bradway displayed his discipline and dealmaking expertise, they say. And rival bidders, apparently, didn't ratchet up the price. "The price has come in marginally less than what it was supposed to be," Credit Suisse analyst Ravi Mehrotra told The Wall Street Journal. "That tells us that it is unlikely there was a bidding war here."
That wasn't the scuttlebutt ahead of time: Some Big Pharma names and other industry buyers were rumored to be mulling offers. For instance, AstraZeneca ($AZN), which could really use the revenue from Onyx's blood cancer drug Kyprolis, was said to be in the hunt, as was cancer specialist Celgene ($CELG), which markets competing products.
As Reuters notes, a more impatient buyer than Bradway might have come back with a higher bid as other shoppers took a look and ended up overpaying. "Investment bankers on both sides tried to spread rumors either to hold back the price or ratchet the bids up, and in the end Amgen was able to get the deal done without overpaying," OrbiMed Advisors general partner Sven Borho told Reuters.
So, what say the industry analysts who criticized Amgen for choosing Bradway, a numbers guy, to replace founding CEO Kevin Sharer? They might be eating their words now, if not publicly. "Because of his experience as an investment banker, he was able to avoid a lot of the mistakes that a lot of rookie CEOs make in acquisitions," a source familiar with the sale process told Reuters. "He was very disciplined and was willing to wait effectively two months for the process to play out."
Of course, the proof of Amgen's supposed wisdom and prescience will only come with time. Will Kyprolis, the only drug Onyx fully controls, keep growing apace? Will it win regulatory approval for broader use? Will its partnerships with Bayer on Nexavar and Stivarga continue to pay off? And how will the Onyx pipeline do? Plenty of questions remain. Stay tuned.
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