This Biotech's for Sale! Reportedly.
May 15th 2012 2:35PM
Updated May 15th 2012 4:08PM
Amylin Pharmaceuticals (NAS: AMLN) investors are giddy today after Bloomberg reported a laundry list of potential suitors for the biotech.
You'll recall the same publication said Bristol-Myers Squibb (NYS: BMY) reportedly made an unsolicited offer of $22 per share a few months back. Amylin neither confirmed nor denied it, and wasn't particularly forthcoming about its future plans beyond the usual rhetoric about "fiduciary duties" and "creating the greatest value for our stockholders."
Amylin has been looking for an ex-U.S. partner for its diabetes drugs since Eli Lilly (NYS: LLY) cut and run. Selling the drug rights outside the U.S. would likely make Amylin a less attractive acquisition target. But it appears from the Bloomberg report that Amylin is exploring a buyout first. Pfizer (NYS: PFE) , AstraZeneca, Sanofi, Merck (NYS: MRK) , Takeda, Roche, and Bristol have reportedly all shown enough interest to sign confidentiality agreements.
I think you have to assume at this point that Amylin's bankers are releasing this info with the blessing of the biotech. It's possible there are multiple "people familiar with the matter" that get their kicks being unnamed sources, but I'm inclined to believe that Amylin wants the information out there to help fuel the bidding war.
Is Amylin worth buying at this point? I think you have to make a lot of assumptions to buy here:
- Bloomberg is right. I think that's a reasonable assumption. There are three authors on the article; I'm willing to bet they went the extra mile to authenticate what the sources were saying as best they could.
- The companies will bid. Signing a confidentiality agreement doesn't mean they'll put in a bid. The companies could be trying to get a leg up on an ex-U.S. partnership, but not be interested in the entire company.
- A suitor is willing to pay more than the current value. This is the hardest of the three to accept. Bydureon hasn't been on the market for long enough to get a good sense of its potential. If a suitor does top the current market price, I wouldn't expect much of a premium; Amylin is up 140% this year.
The jump today is justified because the news brings some clarity to Amylin's plan. But there's still a real risk that no buyer will appear and shares will retreat substantially, making it inappropriate for all but the most risk-tolerant investors.
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At the time this article was published Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Pfizer. The Motley Fool has a disclosure policy.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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