Amgen Said to Be Near Deal to Buy Onyx for $10.5 Billion

Amgen Said to Be Near Deal to Buy Onyx for $10.5 Billion

BY MICHAEL J. DE LA MERCED AND ANDREW POLLACK

Amgen is close to a deal to buy Onyx Pharmaceuticals Inc., a maker drugs to fight cancer, for about $10.5 billion, people briefed on the matter said on Saturday.

A deal — in which Amgen would pay about $125 a share — could be announced as soon as Monday, though these people cautioned that talks are continuing and could still fall apart.

If a transaction is completed, it would be the latest of many in the health care industry, especially as drug makers look to add to their offerings. One attractive set of products is new cancer drugs, which can fetch high prices.

Amgen is the world’s largest biotechnology company by sales, with $17.3 billion in revenue last year. But its top-selling products are older and many are selling more slowly, or even declining.

Some of the company’s drugs are also facing competition in Europe from near-generic copies, known as biosimilars, and that competition is expected to come to the United States in the next few years. Teva is expected to introduce a near-copy of Amgen’s Neupogen, a drug that helps prevent infections in patients undergoing chemotherapy, late this year.

A deal for Onyx would be the first big takeover struck by Robert A. Bradway, who became Amgen’s chief executive in May of last year. Analysts expected Mr. Bradway, who spent most of his career as an investment banker at Morgan Stanley, to drive a tough bargain.

Amgen began its quest for Onyx in June, when it made an unsolicited bid valued at $120 a share, about 38 percent above the stock price at the time.

But Onyx rebuffed the approach and hired the investment bank Centerview Partners to seek bids for the company. A number of drug makers expressed interest, including Pfizer and Novartis, but analysts considered Amgen the most likely buyer.

Onyx’s main attraction is its cancer drugs, two of which won approval last year. Its crown jewel is Kyprolis, a drug for multiple myeloma that was approved in July and that Onyx fully owns.

Several analysts expect annual sales of Kyprolis to reach $2 billion within several years, providing tremendous impetus to Onyx’s growth. The company reported $362.2 million in revenue in 2012, mostly from proceeds of drugs it shares with Bayer.

But Kyprolis’s $61 million in sales during the second quarter were slightly below some analysts’ expectations, raising concerns about competition. Onyx also disclosed that the drug had failed to improve survival in an interim analysis of results from a clinical trial being conducted to win approval in Europe. While that does not mean the drug does not work, the company must now wait for final data from the testing, which is expected in the first half of next year.

A brief hiccup in the discussions occurred recently when Amgen demanded to see more clinical trial data on Kyprolis, people briefed on the discussions have said. Amgen sought to lower its bid from the $130 a share it had floated because of that dispute.

Onyx and its advisers, however, have come to the conclusion that at $125 a share, Amgen’s bid is significantly more than its original proposal  and outweighs the uncertainty of a drawn-out sales process, one of the people briefed on the matter said.

At $125 a share, Amgen would be paying about 13 times the amount analysts expect Onyx to have in sales over the next 12 months, one of the highest multiples in the biopharmaceutical industry.

Mark Schoenebaum, a biotechnology and pharmaceutical analyst at the ISI Group, has said that many of Amgen’s largest shareholders are value investors who are interested in having the company return money to shareholders through dividends and share buybacks instead of making big acquisitions.

“I think they are under a lot of pressure to not overpay,’’ he told clients this week.