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...