Amgen licenses heart disease pipeline from smaller biotech

Amgen agrees to buy $33 million of Cytokinetics stock and pay an additional $42 million drug licensing fee to bolster pipeline.

By Aaron Smith, CNNMoney.com staff writer

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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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.