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Tuesday, December 18, 2012

M&A Deal of the Year Nominee Bristol-Myers/Amylin/AZ

It's time for the IN VIVO Blog's Fifth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (a half dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.


For size alone, the $7 billion acquisition of Amylin Pharmaceuticals jointly by Bristol-Myers Squibb and AstraZeneca deserves consideration as 2012's M&A deal of the year. But there's more to 2012's largest acquisition than size. Among the fascinating features: an innovative, two-part, three-party structure; two rather troubled Big Pharma companies aiming to turbocharge their push further into diabetes; and a U.S. biotech facing stiff competition now and in the near future for its lead products.

BMS paid $5.3 billion to purchase Amylin, and assumed $1.7 billion in net debt and a contractual obligation to Amylin's former partner Eli Lilly & Co. Then, AstraZeneca paid $3.4 billion to BMS to acquire 50% of Amylin, and later paid an additional $135 million to have equal governance over the asset.

The deal was said to be set up this way to simplify it: in the business world, it's complicated for a seller to deal with two buyers who want to buy an asset jointly. Much easier all round for Amylin to deal with one buyer, and for the acquirers to flesh out their own arrangements later. Even if one assumes that all adverse eventualities were covered contractually, the rarely used arrangement must still have required more than a soup├žon of good faith and trust between the parties involved. If only for the reason that faith and trust, which are so rare to find these days, played their part, the acquisition deserves your vote.

It’s usually true that two heads are better than one. (Except, of course, in politics, where coalitions invariably go sour, but that's another story.) BMS and AstraZeneca are hoping to use their expertise, across different physician groups (primary care, secondary care) and geographies (Western countries, emerging markets) to maximize the potential of Amylin's diabetes GLP1-agonist therapies, twice-daily Byetta (exenatide) and once-weekly Bydureon (extended-release exenatide).

Some might quibble the acquisition smacked of desperation, that the joint marketing of the oral antidiabetic DPP-4 inhibitor Onglyza (saxagliptin) by BMS and AZ under an alliance formed in 2007 was already going nowhere, and their other innovative antidiabetic, the SGLT-2 inhibitor, Forxiga (dapagliflozin), was floundering at the regulators. Others said that at $31 a share, the companies had overpaid, which they could ill-afford.

We're having none of it. BMS and AZ fervently believe they can re-invigorate the sales growth of the once weekly GLP1 agonist Bydureon, which is the launch phase, by not only the deployment of their marketing assets but also through the development of new formulations and administration devices.

It’s a tough challenge because of the tremendous competitive pressure expected in the market from already launched competitors like Novo Nordisk with its GLP1 agonist, Victoza (liraglutide) and those nearing the market with GLP1 offerings, such as Sanofi/Zealand (lixisenatide), GlaxoSmithKline (albiglutide), Lilly (dulaglutide) and others.

But it's not as if either BMS or AstraZeneca lack recent experience in assimilating companies and products, at least on their own. In 2012, AstraZeneca also bought U.S. biotech Ardea Bioscience for $1.26 billion to gain access to its Phase III gout therapy, lesinurad, and BMS acquired Inhibitex for $2.5 billion, for its hepatitis C targeted nucleotide polymerase inhibitor, INX-189.

Other goodies likely to accrue to BMS and AstraZeneca from the Amylin acquisition are operating synergies and tax advantages too, making it a standout acquisition for those reasons as well. What are you waiting for? Vote for this acquisition.

--John Davis

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