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July 23, 2009
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Yesterday, Bristol-Myers Squibb (BMY)">BMY) announced its intention to acquire biotech company, Medarex (MEDX)">MEDX) for $2.4 billion. Medarex specializes in the development of fully human antibody-based therapeutics for the treatment of life-threatening and debilitating diseases, including cancer, inflammation, autoimmune disorders and infectious diseases.
Bristol-Myers’ offer price of $16 per share represents a 90% premium to Medarex’s closing price of $8.40 on Wednesday. However, the actual cost of the deal, which is scheduled to close in late August, should be about $2.1 billion as Medarex has approximately $300 million in net cash and marketable securities.
The acquisition of Medarex should help Bristol-Myers expand its biologics platform. Bristol-Myers will have access to Medarex’s UltiMAb human antibody development system, which has been successfully used in the development of compounds that are currently marketed – Johnson & Johnson (JNJ)">JNJ)/Schering-Plough’s (SGP)">SGP) Simponi, J&J’s Stelara and Novartis’ (NVS)">NVS) Ilaris. Besides this, Medarex has a next-generation Antibody-Drug Conjugate (ADC) technology, which could open new fields in oncology drug development.
Bristol-Myers and Medarex already have a partnership agreement for a phase III compound, ipilimumab, which is being developed for metastasis melanoma. Ipilimumab is also being studied for the treatment of lung cancer and adjuvant melanoma and hormone-refractory prostate cancer. Medarex currently has ten antibodies in clinical trials, three of which are being developed with partners. We expect this deal to significantly boost Bristol-Myers’ immuno-oncology pipeline.
Of late, there has been a lot of activity on the merger-acquisition front with several pharma companies resorting to acquisitions and mergers to boost their pipelines and to make up for the loss of revenues that will arise with the expiry of patent exclusivity for key products.
In keeping with this trend, Bristol-Myers has also been pretty aggressive on the acquisition and deal-making front. Over the past couple of years, the company acquired Adnexus Therapeutics and Kosan Biosciences Inc. The company also made an unsuccessful attempt to acquire ImClone Systems which was finally acquired by Eli Lilly (LLY)">LLY). Besides this, Bristol-Myers has been working on strengthening its biologics portfolio by entering into partnership deals with biotech companies.
Bristol-Myers will be reporting second quarter results today. We expect the company to deliver adjusted earnings of $0.45 per diluted share on revenues of $5.2 billion. We currently have a Buy rating on the stock with a $27 price target.
Read the full analyst report on "BMY"
Read the full analyst report on "MEDX"
Read the full analyst report on "JNJ"
Read the full analyst report on "SGP"
Read the full analyst report on "NVS"
Read the full analyst report on "LLY"
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