Bristol-Myers’ $35 Fair Value: Amylin Acquisition Helps Target Diabetes Market

by Trefis Team
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Bristol-Myers Squibb
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Bristol-Myers Squibb (NYSE:BMY) announced that it has successfully completed its tender offer to acquire all outstanding shares of Amylin Pharmaceuticals (NASDAQ:AMLN) at a purchase price of $31 per share. [1] The company had announced on June 29, 2012, plans to acquire Amylin for approximately $7 billion, including $1.7 billion in net debt and certain amount payable to Eli Lilly (NYSE:LLY). [2]

Amylin, whose drug portfolio primarily consists of anti-diabetic drugs such as Byetta and Bydureon, will become part of Bristol-Myers’ anti-diabetic alliance with AstraZeneca (NYSE:AZN). Accordingly, AstraZeneca will contribute $3.4 billion to Amylin post the completion of the acquisition, and it has the option to acquire equal governance rights on key financial decisions of the alliance on further payment of $135 million to Bristol-Myers.

Overall, the acquisition is a good strategic fit in Bristol-Myers’ drug portfolio and will help offset the ongoing decline in its revenues due to patent expiry of Plavix.

We currently have a stock price estimate of $35 for the company, approximately 10% above its current market price.

See our complete analysis for Bristol-Myers Squibb here

The tender offer

Bristol-Myers acquired a total 140.55 million shares in the tender offer and now owns 85.55% of all outstanding shares of Amylin. Hereafter, as per the terms negotiated earlier, Bristol-Myers will purchase additional shares from Amylin, and all outstanding shares of common stock that were not acquired in the tender offer stand converted to cash at $31 per share. Thus, Amylin is now the wholly owned subsidiary of Bristol-Myers.

Acquisition a good fit for Bristol-Myers

The company gains a major anti-diabetic drug, Bydureon, from the acquisition. Anti-diabetes drugs as a therapeutic class are poised for growth over the coming years as diabetes has become a global epidemic. Bydureon treats type-2 diabetes and is prescribed to be taken once a week. It has already received approvals in the U.S. and the E.U.

On the whole, the acquisition is expected to aid revenue growth for the company over the coming years and help offset the ongoing decline in its top-line owing to patent expiration of Plavix and Avapro. In addition, the Amylin acquisition will help Bristol-Myers take a larger share of the growth anticipated in anti-diabetic drugs market over the coming years.

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Notes:
  1. Bristol-Myers Squibb Announces Successful Completion of Cash Tender Offer for Shares of Amylin Pharmaceuticals, Inc., August 8, 2012, www.bms.com []
  2. Bristol-Myers Squibb and AstraZeneca Expand Diabetes Alliance Through Bristol-Myers Squibb’s Acquisition of Amylin Pharmaceuticals, June 29 2012, www.bms.com []
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