The $2.2-billion deal will give Amgen full control of a colon-cancer drug the companies had been developing together.

01:00 AM EST on Thursday, December 15, 2005

BY ANGELA ZIMM
Bloomberg News

Amgen Inc., the world's biggest biotechnology company, yesterday said it has agreed to buy Abgenix Inc. for $2.2 billion in cash.

Amgen, based in Thousand Oaks, Calif., has a manufacturing facility in West Greenwich and employs more than 1,000 people in Rhode Island.

It will pay $22.50 for each share of Freemont, Calif.-based Abgenix, a biotechnology company that develops human therapeutic antibodies, the companies said in a statement. The amount represents a 54-percent premium over Abgenix's closing price today.

The two companies have been partners in developing panitumumab, a colon-cancer treatment, of which Amgen will acquire full ownership. The transaction will also eliminate a royalty that Amgen would have to pay on future sales of denosumab, a treatment for osteoporosis that it developed using Abgenix technology, Amgen said.

"It's a deal that makes a lot of sense financially, and improves Amgen's pipeline longer term," said Sven Borho, a partner at Orbimed Advisors in New York, which manages about $6 billion in health stocks, including Amgen and Abgenix shares.

Abgenix shares rose 46 cents, or 3.2 percent, to $14.65 in Nasdaq Stock Market composite trading, bringing its gains for the year to 42 percent. In late trading, the stock jumped to $21.80.

Shares of Amgen fell 68 cents, to $76.78, in Nasdaq composite trading. Amgen has gained 20 percent this year.

"Abgenix is a natural strategic fit for Amgen, given our strong existing relationship," said Kevin Sharer, Amgen's president and chief executive officer, in today's joint statement. "This investment reflects Amgen's commitment to our pipeline and our growing confidence in the future success of both panitumumab and denosumab."

Panitumumab would compete directly with ImClone Systems Inc. and Bristol-Myer Squibb Co.'s colon-cancer drug, Borho said.

"They're going head-to-head with Erbitux," Borho said. "With Amgen's marketing, it could become a bigger drug than Erbitux."

And denosumab could be an even bigger product than panitumumab, Borho said. He estimated the osteoporosis medicine may generate as much as $2 billion in annual sales.

Panitumumab is produced by mice that have been genetically engineered, with human genes, to make molecules that help prevent cancer from growing in patients.

Abgenix had earlier sold half the drug's future profits to Immunex Corp., which Amgen acquired in 2002. Abgenix is also developing an osteoporosis drug.

Later this week, the companies plan to apply for U.S. regulatory approval of panitumumab, according to yesterday's statement. The product "is Amgen and Abgenix's most advanced cancer therapeutic," the statement said.

Amgen said it expects the purchase to dilute its adjusted earnings per share in 2006 and 2007 by 5 cents to 10 cents a share. The effect on adjusted earnings per share would "be accretive thereafter, assuming commercial success of panitumumab," the company said.

The transaction, which is subject to clearance by regulators and Abgenix shareholders, is expected to be completed by the end of the 2006 first quarter, the companies said.