Mergers, Acquisitions, Alliances and Synergies Case Study

Case Title:

Amgen's Acquisition of Abgenix: The Expected Synergies

Abstract:
Amgen, the world's largest biotechnology company, completed the acquisition of Abgenix, Inc., for $22.50 in cash per share of common stock, a 54 percent premium over Abgenix's last closing price. The acquisition of Abgenix provided Amgen with full ownership of one of its most important pipeline products, “Panitumumab”. Panitumumab was their most advanced cancer therapeutic and was a natural extension from Amgen's existing oncology supportive care franchise. The acquisition also eliminated a royalty that Amgen would have paid to Abgenix on future sales of Denosumab. Some analysts believed it to be a right move, as of the end of September, Amgen had over $5.5 billion in cash and was generating over $1 billion in free cash flow per quarter, but others were skeptical about the high expected sales figure of panitumumab. This case deals with the acquisition of Abgenix by Amgen. It provides a brief overview about the two companies and highlights Amgen’s focus on oncology segment. This is followed by a brief overview of biotechnology sector and the global cancer drug market. The case also deals with the expected synergies and possible challenges that will result from the acquisition.

Pedagogical Objectives:

• To understand, why pharmaceutical companies become aggressive over a particular drug
• To understand the different modes of commercializing a new drug developed by a pharmaceutical company
• Evaluation of the possible future strategic options for Merck
• To understand the synergies of a merger of two pharmaceutical companies.

Keywords :  Acquisition; Synergy; Amgen; Abgenix; Biotechnology; Oncology; Cancer; Panitumumab; Metabolic disorder; Inflammation; Licensing; Clinical trial; Pipeline; Xenomouse; Venture capital