Amgen Buys Ilypsa, Diversification Via Acquisition

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Amgen (AMGN) is paying a hefty sum to diversify its Aranesp and Epogen franchises.  The company is acquiring developmental-stage Ilypsa, a biotech company based in San Francisco that focuses on kidney disease care, for some $420 million in cash.  Ilypsa’s lead drug candidate, ILY101, is a phosphate binder for the treatment of hyperphosphatemia in chronic kidney disease (CKD) patients on hemodialysis.  ILY101 has completed Phase 2 trials in patients with CKD who are on hemodialysis.

After all of the problems the company is having on side effects from the Aranesp and Epogen franchises, you can hardly blame them for wanting to acquire their way into new treatments.  It’s obvious they will need to replace some of the lost business now and down the road.  it also will be perhaps the first biotech to come undef ire if there is a major regime change or policy shift because of the attack on reimbursements to biotechs with no generics on the market.

The only issue here is if the company is making the right move focusing on renal functions since this and anemia are such a large source of its current blockbuster drug portfolio.  The hope is that this will be able to replace it.  Current Amgen investors will have to hope that this diversification is not so close to its existing line that it isn’t robbing Peter to pay Paul, and they better hope the price is justifiable.

Amgen ended last quarter with $4.777 Billion in cash and equivalents, $2.15 Billion receivables, $2.11 Billion in inventory; total assets after backing out goodwill and intangibles were more than $17.5 Billion; and total liabilities were $12.855 Billion. Shares closed Monday down less than 0.1% at $56.91, and AMGN’s 52-week trading range is $52.36 to $77.00.

Jon C. Ogg
June 4, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.