The Deal: Amgen Soars on $10.4B Onyx Deal

NEW YORK ( TheStreet) -- After a tortuous courtship, including Onyx Pharmaceuticals ( ONXX) rejection of an initial $120 per share bid from Amgen ( AMGN), and a subsequent auction that may have had most of big pharma looking over the wares, the companies said Sunday they had clinched a deal at $125 per share, or $10.4 billion.

The total comes to $9.4 billion net of Onyx cash.

"We believe that Amgen is ideally suited to realize the full potential of Onyx's portfolio and pipeline for the benefit of physicians and patients," said Amgen CEO Robert Bradway in a statement. "Our acquisition of Onyx follows a thorough due diligence process and is fully consistent with our strategy of advancing innovative medicines that address serious unmet medical needs. We expect this acquisition will accelerate growth and enhance value for Amgen shareholders."

The deal bolsters Amgen's cancer treatment pipeline, with Onyx's drug Kyprolis, a type of proteasome inhibitor that treats relapsed and refractory multiple myeloma, being one of the keys to the deal. Indeed, shortly before the deal was announced, the buyer was asking for a look at incomplete Kyprolis trials, although that was likely more of a negotiating tactic than a dealbreaker.

The Food and Drug Administration offers urgently needed drugs accelerated approval based on preliminary data. However, the drug company must continue to pursue more proof of the drug's clinical effectiveness to attain permanent, or regular, approval.

To attain that approval, and market the drug in the EU, South San Francisco, Calif.-based Onyx has two major ongoing Kyprolis clinical trials: Focus and Aspire. Aspire is a Phase 3 clinical trial with an endpoint of progression-free survival to remain on the market. (A patient with progression-free survival is cancer-free at that time.) Final results for Aspire are expected in 2014.

The other trial, Focus, should end a little earlier, but also will have a final read-out in 2014. It has always been viewed as risky by investors and analysts because it compares Kyprolis to "best supportive care," meaning the treatment regimen is left up to the individual doctor. So the control arm is not truly controlled.

Even if Focus were to fail, Onyx management has said that positive Aspire trial results would be enough to gain EU approval. When asked the question during Onyx's Aug. 8 earnings call, executive vice president of global research and development Pablo Cagnoni said, "We're very confident on the design of Aspire ... progression-free survival is the primary endpoint, this has been established as an approvable endpoint in patients with myeloma." Cagnoni also said the company is "very confident that Aspire will show a difference in progression-free survival that would be more than sufficient to support registration in Europe and certainly in the U.S."

"Amgen has a unique opportunity to add value to Kyprolis, a product which is at an early and promising stage of its launch," Bradway said.

Thousand Oaks, Calif.-based Amgen has arranged $8.1 billion in financing to back the acquisition, according to SEC filings. The debt carries an average interest of L (Libor) +104.

The commitments consist of a five-year $5 billion senior unsecured term loan and a $3.1 billion structured term financing agreement that involves preferred stock that Amgen owns in ATL Holdings.

The company also arranged a $500 million bridge loan. SEC filings said Amgen will use up to $1.5 billion in cash-on-hand and $500 million of cash from Onyx to pay for the acquisition, as well.

Bank of America Merrill Lynch acted as the administrative agent on the 364-day bridge loan. The bank also served as a joint lead arranger and bookrunner along with JPMorgan Chase and Barclays. Moody's last rated Amgen at Baa1 with a stable outlook. However, the agency said the Onyx acquisition may be a credit negative depending on the financing arrangements.

Lazard is acting as lead adviser to Amgen; BofA Merrill Lynch is acting as co-adviser and is also lead arranger for the financing; and Sullivan & Cromwell is serving as legal counsel.

Onyx turned to Centerview Partners for financial advice and Goodwin Procter as counsel.

In early trading Monday, Amgen shares were up nearly 9% to $115.36, while Onyx gained 5.7% to $123.59.

-- Written by Paula Schaap and Jonathan Schwarzberg in New York

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