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Amgen eyes Immunex
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December 14, 2001: 12:07 p.m. ET
Biotech leader considers $17B offer for maker of arthritis drug.
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NEW YORK (CNN/Money) - Amgen Inc. is in talks to acquire Immunex Corp. in a $17 billion cash and stock deal, sources close to the situation said Friday.
Amgen, the nation's largest biotechnology company, would pay just over $30 a share for Immunex, the maker of Enbrel, a popular treatment for rheumatoid arthritis that is expected to see annual sales of $4 billion by 2005.
Enbrel has been so successful that Seattle-based Immunex is having trouble keeping up with demand. But the company's stock plunged in March when it pulled the drug from trials for treatment of chronic heart failure after it proved ineffective in treating that problem.
Talks between the companies are at an advanced stage and an announcement could come this week or on Monday, the sources said.
Thousand Oaks, Calif.-based Amgen would pay the bulk of the deal in stock, a source said.
Shares of Amgen (AMGN: down $4.16 to $56.03, Research, Estimates) dropped more than 4 percent Friday while Immunex (IMNX: down $1.34 to $25.62, Research, Estimates) fell nearly 5 percent. Rumors of the deal drove shares of Immunex up $2.51, or 10 percent, to $26.96 in trading Thursday, while Amgen lost $4.20 to $60.19.
Wall Street also expressed doubts about the deal because it would dilute Amgen's earnings for perhaps years to come.
"My first take on it was that I was concerned about dilution to Amgen," said Matthew Geller, an analyst at CIBC World Markets.
"But as I think more about it, there are synergies between the two companies. They are both focused on cancer and autoimmune diseases. And Kineret and Enbrel would be highly synergistic, patients could take them together," Geller noted.
He said a stumbling block for the merger would be receiving the go-ahead from drug giant American Home Products (AHP: up $0.60 to $58.85, Research, Estimates), which owns about 41 percent of Immunex.
After the deal, American Home would end up with about an 8 percent stake in the enlarged Amgen. All three companies declined to comment on Thursday.
"Amgen is getting a lot more aggressive about building its pipeline, and American Home is clearly much more interested in monetizing assets than they ever have been in the past," said Peter Crowley, head of health-care investment banking at CIBC, who is not involved in the deal.
Crowley said such a deal, while expensive for Amgen, would likely benefit all three companies. For Amgen, it would help offset heavy reliance on anti-anemia drug Epogen and immunity-booster Neupogen, both billion-dollar sellers. And Immunex has few major drugs in development to augment Enbrel.
However, experimental drugs in the company's pipeline have suffered some significant setbacks.
In March, Immunex said it would halt testing of Enbrel in chronic heart failure patients because the drug did not prove effective in clinical trials. The company had theorized Enbrel's anti-inflammatory mechanism would help heart patients.
Immunex also said at the time that two mid-stage trials of its experimental asthma drug Nuvance showed no apparent benefit in opening up lung airways. Immunex's stock plunged on the double dose of bad news.
The biotech sector has seen a rash of acquisitions this month, with the acquirers buying mature companies with drugs that are either already on the market or will be soon.
Both Immunex and Amgen declined comment. 
-- from staff and wire reports
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