Amgen (AMGN) said on Thursday it will spend $ 1.9 billion to buy Five Prime Therapeutics (FPRX), a small biotechnology company with a promising remedy for stomach cancer. The news caused FPRX shares to rise.
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The agreement includes bemarituzumab, a possible treatment for stomach cancer that is ready to begin Phase 3 testing, Amgen said in a news release. Amgen CEO Robert Bradway called the Five Prime buyout in a written statement a ‘compelling opportunity’.
The deal values FPRX shares at a premium of 79% over the previous close, SVB Leerink analyst Geoffrey Porges said in a report to clients. This is reasonable since Five Prime was developed in the late stage of bemarituzumab. But this may not be Amgen’s last acquisition of the year.
“The Five Prime acquisition is a fairly small transaction for Amgen in relation to our expectations for the year and Amgen’s capabilities (for mergers and acquisitions),” he said. “We therefore believe that there may be more to expand the pipeline further.”
FPRX Stock rises with takeover
In the stock market, FPRX shares capitulated 78.7% to 38 today. Amgen shares fell 0.9% to 221.91.
Under the agreement, Amgen will launch a tender offer to acquire all outstanding shares of FPRX shares for $ 38 per share. After the cash contract, a full filter from Amgen will merge with Five Prime. The deal is expected to close in the second quarter.
Stomach cancer is the third leading cause of cancer deaths in the world, and is particularly prevalent in the Asia-Pacific region. Amgen plans to use its presence in Japan and the Asia-Pacific region to further the potential of bemarituzumab.
Five Prime has a development and commercialization agreement with China Zai Lab (ZLAB) for the middle. In conjunction with the acquisition, Amgen will receive a royalty on future net sales of bemarituzumab in Greater China.
“We look forward to welcoming the Five Prime team at Amgen and working with them to leverage our best monoclonal antibody production capabilities to provide additional clinical material, as well as extensive production volumes, to reach the full potential of bemarituzumab for even more patients around the world as soon as possible, ”said Amgen’s Bradway.
Target a specific protein
Bemarituzumab targets a specific protein that is very common in 30% of stomach cancer cases that are not related to another protein called HER2.
In a drug study, treatment with bemarituzumab prolonged the amount of time before patients worsened. It also resulted in an improved overall reaction rate.
Another analysis showed a positive correlation between the amount of protein on tumor cells and the effectiveness of the drug. This suggests that bemarituzumab may play a role in lung, breast, ovarian and other cancers. But the FPRX share tumbled nearly 11% that day.
Follow Allison Gatlin on Twitter @IBD_AGatlin.
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