Amgen licenses heart disease pipeline from smaller biotech

NEW YORK (CNNMoney.com) -- The biotech giant Amgen signed an agreement with the lesser-known biotech Cytokinetics to develop treatments for heart disease and bought some of its stock, the companies said.

Amgen (up $0.81 to $69.12, Charts), the world's largest biotech in terms of annual sales, and Cytokinetics (up $1.40 to $8.88, Charts), announced on Wednesday their collaboration to develop drugs to treat heart failure. This includes the continued development of Cytokinetics' lead pipeline drug, which is still in the early stages of testing and years away from a potential filing with the Food and Drug Administration.

Amgen, based in Thousand Oaks, Calif., agreed to pay an up-front $42 million licensing fee to Cytokinetics, based in South San Francisco. Also, Amgen agreed to buy 3,484,806 shares of the smaller company's stock at $9.47 per share, for a total purchase price of about $33 million. After the announcement, Cytokinetics stock price soared more than 18 percent and Amgen's price edged upwards more than one percent.

In addition, Cytokinetics stands to gain up to $600 million in milestone payments, the companies said. These potential payments could mean a lot to Cytokinetics, which has a relatively small market capitalization of $322 million.

In comparison, Amgen has a market cap of nearly $80 billion. Genentech (up $0.56 to $81.69, Charts), the world's second-biggest biotech in terms of annual sales, has an even larger market cap, of $85 billion.

This is the latest merger in an industry where large companies continually buy smaller ones - or license their products - in order to beef up their pipelines to bolster future sales growth.

Heart disease, the number one killer in America, is considered a particularly lucrative market. It is also the largest industry in health care. Pfizer (up $0.40 to $26.30, Charts), the world's biggest drug company, has estimated the heart disease market to be $85 billion.

Cytokinetics focuses on the development of drugs that target the cytoskeleton, which the company defines as "a complex biological infrastructure that plays a fundamental role within every human cell." The cytoskeleton is the internal framework of cell.

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