The Inevitable Amylin Buyout (AMLN, BMY, LLY, ALKS)

March 28, 2012 by Jon C. Ogg

If there was a merger candidate which ever made sense in biotech and pharma it is Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN).  News from Bloomberg is out that the company has rejected an offer to be acquired by Bristol-Myers Squibb Company (NYSE: BMY).

Investors often speculate that drug partners (or competitors) will merge.  After all, if a big drug company can add on full revenues rather than partial revenues and can milk out cost efficiencies of the combined outfit, it only makes sense if the price is right.  That also could bring Eli Lilly and Company (NYSE: LLY) into the mix if you look through recent press releases.  Amylin has been the subject of takeover rumors on and off over the last 8 years or so.  Frankly, any large drug company could be a potential acquirer of this company if the price is right.

Bloomberg has reported that Amylin rejected a $3.5 billion offer.  Bristol-Myers has a market value of nearly $57 billion.  Amylin shares are now up 48% at $22.62 and many investors believe that BYETTA can become a blockbuster drug as a new treatment for diabetes.  To prove the point, Thomson Reuters has consensus revenue targets of $688.12 million for 2012 and $845.3 million for 2013.

As a reminder, Amylin lists Alkermes plc (NASDAQ: ALKS) as a strategic partner and noted on its partnership page “Amylin worked with Alkermes to develop the first once-weekly treatment for type 2 diabetes using Alkermes’ proprietary technology for long-acting medications.”

It also noted that Takeda Pharmaceutical Company Limited is a partner: “In October 2009, Amylin and Takeda entered into a worldwide exclusive license, development and commercialization agreement to co-develop and commercialize pharmaceutical products for the treatment of obesity and related indications.”

Biocon, Limited is the other partner listed: “In September 2009, Amylin and Biocon entered into an exclusive agreement to jointly develop, commercialize and manufacture a novel peptide therapeutic for the potential treatment of diabetes.”

We are treating this as a rumor only at this point, but we suspect that the company will either confirm the report or issue a statement that they are not going to comment on market rumors.  Either way, Amylin is one of the emerging biotech and biopharma players which seems like a shoe-in to be acquired soon or down the road.  The real question is what price, and ultimately when.

JON C. OGG