Amgen Inc. (NASDAQ: AMGN) submitted an SEC Filing showing that, as of April 1, its Amgen Manufacturing Ltd. subsidiary and GlaxoSmithKline PLC (NYSE: GSK), via Glaxo Group Ltd., have terminated an agreement. The news weighed on both stocks, which raises the question why they would terminate if it hurts both.
Source: Thinkstock
The companies terminated part and amended part of their collaboration agreement from 2009 regarding the commercialization of Denosumab for osteoporosis indications in certain geographic territories.
Amgen’s filing said:
The Transition Agreement terminates the Collaboration Agreement for all countries and regions of the collaboration territory (including the European Union, Switzerland, Norway, Russia and Mexico) except for Australia. All commercial activities assigned to GSK under the Collaboration Agreement other than those in Australia will be transitioned back to Amgen no later than December 31, 2014. In exchange for the early termination (except Australia) of the Collaboration Agreement, Amgen will pay to GSK an initial payment and specific milestones over the Transition Period totaling $275 million. In addition, Amgen will reimburse GSK $15 million for costs incurred by GSK in performing its obligations during the Transition Period.
So, exiting this comes at a cost of nearly $300 million to Amgen. The companies are saying that this termination “does not change the terms of the separate Expansion Agreement dated as of July 27, 2009 relating to the commercialization of Denosumab for all indications in certain geographic territories, by and between Amgen and GSK, as amended to date, which continues in full force and effect.”
Apparently it is not all peaches and cream here. After an hour of trading on Thursday, GlaxoSmithKline ADSs were down 0.9% at $52.51 in New York and Amgen shares were down 1.7% at $123.92.
Maybe this is one of the many reasons why Amgen and large-cap biotech peers are trading at the same valuations as old world Big Pharma stocks.
Sponsored: Attention Savvy Investors: Speak to 3 Financial Experts – FREE
Ever wanted an extra set of eyes on an investment you’re considering? Now you can speak with up to 3 financial experts in your area for FREE. By simply
clicking here you can begin to match with financial professionals who can help guide you through the financial decisions you’re making. And the best part? The first conversation with them is free.
Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Editors' Picks
