Over the past week, word has leaked out that Amgen, a beleaguered biotech, is interested in buying Actelion Pharmaceuticals in hopes of expanding into the cardiovascular market. But a couple of fund managers say they are not impressed with the possibility and one large Amgen shareholder (see photo) complains that such a move is "faulty thinking by a hard-up executive staff."
What would Amgen get? For the most part, Actelion is a one-trick pony; the drugmaker last year derived about 85 percent of its revenue from Tracleer, a med that is used to treat pulmonary arterial hypertension and generated about $1.5 billion in sales. There are also four experimental meds in the final throes of testing, including two that are also being developed to treat PAH (see pages 17 and 18 of the annual report here).
As for Amgen, the biotech has largely been struggling thanks to competition for its Enbrel rheumatoid arthritis med as well as declining sales of its Aranesp and Epogen anemia treatments, which have been sliding ever since being linked to heart attacks (back story here). The recent approval of Prolia for post-menopausal osteoporosis may eventually compensate to some degree, but Actelion does not offer a salve, according to Invesco's Derek Taner.
"We looked at Actelion a couple of times as an investment idea and I don’t see what’s hugely compelling,” he tells Bloomberg News. The Actelion pipeline “aren’t no-brainers. There is risk to them, and attempts to extend patent life for new and improved molecules isn’t as easy as it used to be." Similarly, Paul Wagner at RCM Capital Management says a deal would carry “significant risk in terms of clinical development, commercial success and ultimately investor confidence in management.”
Then, there's Steve Silverman,* a retired insurance exec who holds an undisclosed amount of Amgen stock in a family trust and has been a vocal critic of Amgen management for some time (see picture). He has this to say: "At this point, nothing will help our company, including Actelion. (Amgen ceo Kevin Sharer) bought other companies and they all turned out to fizzle. Immunex was the first he went for...I strongly challenge any belief that Amgen can boost sales significantly, with a well used drug as Tracleer.
"This could end up being another Enbrel situation, where the competition is so keen that Amgen's Enbrel is falling to the wayside. With Tracleer, the market looks pretty well saturated (it's been available for eight years). This is faulty thinking by hard up executive staff. No big thinkers there...If you tear it apart, you get nothing more than another dull producer. I don't see any other company banging down the doors to buy an albatross.
"Usually, a company doesn't show its cards in an effort to buy lower, than have talk dancing about and the price rising, just as is happening now. It will be another mistake if Amgen makes an offer. I said it about Immunex and I was right. Abgenix was supposed to also be a big help to Amgen's bottom line. Nothing to write home about. Amgen's buy record is not good."
* no, he is not a relative...
10 Comments
Very illuminating story about a company struggling to make it right, and big. Actelion is not the way! How about licensing? Better than buying the cow, when all you need is the milk?
"Amgen, a beleaguered biotech" ? I don't see any mention of Prolia(Denosumab) here. Prolia will be priced so every post menopausal baby boomer women can take it for osteoporosis. Tens of millions of steady customers for decades. Let alone its' eventual use for bone cancer.
As for Steve Silverman, he's a sham. Amgen has tripled it's revenue over the last decade, but has not gone anywhere,stock price-wise. Amgen is beyond a mature biotech.
Move the "large family holding" as has been written over the years, elsewhere.
Hi Bob,
Thanks for the note, but there is mention of Prolia in the third paragraph.
Regards Ed
As someone who worked for Amgen for several years (as a department head) back in the 1990s, I can tell you that upper management has always been a problem. The number of drug candidates that were internally "very promising" and sucked up large quantities of staff time, only to be subsequently discarded, was huge. The people making the decisions were not qualified to do so. And more recently, the companies acquired have all been, for all intents & purposes, duds, in that they really did nothing to enhance Amgen's future. No longer being an insider, I can only surmise that the people making those decisions should be replaced by those with proven track records.
A bit of history is in order: Once Amgen hit the big time with Epogen and Neupogen, the company became profit-drunk. In short, there was an outward sense that everything Amgen touched would turn to gold. That "Amgen culture" formed the basis for the succeeding years of failure. Yes, "failure": failure to sustain growth of the pipeline with truly promising candidates. Unfortunately, just about all of the Research and Development (two far different organizations within Amgen, and never the twain shall meet!) talent has disappeared to other companies as a result of the mismanagement through the 90s and into the 00's. So, when you don't have the talent internally to develop, go outside and buy new products. Unfortunately, that, too, has fallen very short.
How is it that Amgen's top management has been allowed to continue this long? There is an old Chinese saying that is quite appropriate here: "The fish smells from the head down." It is time for a seismic change at Amgen. I waver between (1) a massive change of upper management at an independent Amgen, and (2) Amgen being acquired by another company with a proven track record. Although I had always thought the first was best, I am not convinced that the second is the only option that will save the company and, most importantly, it's investors.
Mr. Carson, Prolia was given the okay for partial applications and we all were surprised how small the sales were. Even Amgen made a comment, as did the analysts.I still believe that the blockbuster effect will occur but not the multi blockbuster that they have hopes for. Another purchase, Abgenix/Vectibix is a near dud and their Vectibix was late to the gate.. Big disappointment for a hoped for BIG SELLER.
Re making more money, may I suggest you do a detailed review of their 1/4 reports and 10K.
Dr. Ken, I have been a shareholder since 1986. The go-go days are gone, thanks to the present management.
I challenge anyone to prove they are big drug successful since EPO/ARANESP. The Enbrel multi money maker is beginning to dry up and we still have years to pay the bad decision down. The two competing drug companies are going full bore. It's embarrassing!
"Surprised how small the sales were" ? It's been on the market for one quarter. It has vast potential, to reach 10's of millions, because of it's low price, lower than any biologic in 20 years.
What better market to have,10's of millions, rather than ,maybe, 100,000 people as almost all other biologics have.
Ed, I stand corrected on your mention of Prolia, but such a short mention was easy to miss.
Actelion is not a good option for Amgen for takeover...
Dr. Ken, I read your 11-23-10 comments and agree. What worries me is how poorly denosumab did when the FDA approved it. The street estimated about 30 million dollars for the 1/4, when it came in at 10 million dollars. What concerns me is, how much money we spent for all those doctor contacts, (prior to approval) by a huge sales force and such a small response. This does not sound like a blockbuster,out of the gate.
It is common knowledge that deno was/is to be a cash cow to help where EPO/Aranesp lost business. I patiently await the good news.
Raja, I completely agree with yours of 11-26-10.
I'd like to see a comment involving Prolia's pricing. It's actually priced lower than Epogen was in June of 1989.
Amgen is in great need for new compounds to secure its future. They have a lot of cash and the opportunities of licensing in compounds are very low and the competition is very high. In contrast to the above, I think that Actelion is a great opportunity for Amgen. It is focusing its effort very successfully on innovative small molecules for unmet medical needs. It is true that the company is currently concentrating on pulmonary arterial hypertension (PAH, 3 drugs on the market and 2 in phase 3 of development). However they have in addition a diversified promosing pipeline that could be quite helpful for the future of Amgen. Add to this the fact that Actelion's sales are about 2 billions per year and the PAH market has a lot of growing potential. The main obstacle for Amgen is the fact that Actelion wants to stay independent !!