AMLN Amylin Pharmaceuticals, Inc. (MM)

Bristol-Myers Squibb Company (BMY) recently announced the commencement of a cash tender offer to buy the entire outstanding common stock of Amylin Pharmaceuticals, Inc. (AMLN). The duration of the tender offer is until August 7, 2012, (5:00 PM New York time). However, the offer, whose closure is subject to certain terms and conditions, can be extended.

We remind investors that Bristol-Myers had announced its decision to acquire Amylin for $31.00 per share or approximately $5.3 billion in cash on June 29, 2012. The offer price represented a premium of 10% on Amylin's closing price on that date.

At the time of announcing the deal, Bristol-Myers stated that it will assume Amylin’s net debt and make a contractual payment to Amylin’s former partner, Eli Lilly & Company (LLY). The total value of the deal will extend to $7 billion in that case. We remind investors that in November 2011, Amylin and Eli Lilly had terminated their partnership for the worldwide development and commercialization of exenatide.

We believe that Bristol-Myers’ impending takeover of Amylin will benefit both companies. We note that following the termination of Amylin’s exenatide agreement with Eli Lilly in November 2011, Amylin has been considered to be a potential takeover candidate for companies with a focus on diabetes. Amylin’s exenatide franchise consists of Byetta and Bydureon (once-weekly exenatide).

While Byetta sales have been lagging expectations, Bydureon, which was launched earlier this year in the US, could very well be a blockbuster. Moreover, the deal is financially rewarding for Amylin’s stockholders, who have been advised by its board of directors to tender their shares. Amylin’s shares shot up significantly from the time acquisition rumors started doing the rounds in March 2012.

The Amylin acquisition is a smart strategic move by Bristol-Myers since it already has a presence in the diabetes market (Onglyza and Kombiglyze). Moreover, the loss of exclusivity of its blockbuster blood-thinner Plavix on May 17, 2012 in the US is likely to result in substantial revenue losses for Bristol-Myers. The Amylin buy, through which Bristol-Myers aims to expand its presence in the lucrative diabetes market, is an effort to combat the substantial revenue losses due to Plavix’s genericization in the US.

The announcement of the Amylin deal is the second major deal for Bristol-Myers this year. In February 2012, Bristol-Myers purchased Inhibitex, Inc., for $2.5 billion targeting the lucrative HCV market.  

Neutral on Bristol-Myers, Amylin

We currently have a Neutral recommendation on Bristol-Myers. The stock carries a Zacks #3 Rank (Hold rating) in the short run. Our stance is similar on Amylin.

 
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