Biotech Values

[biomaven0]

$10B offer for ONXX is way too high

Well the best way to think about it is whether an acquisition at that price would be accretive to AMGN EPS a few years out. And the analysis I have seen to date indicates that it would be - low single digits accretive percentage-wise for the first few years and then mid-teens (and rising) thereafter.

There are a few big drivers of this calculation. The first is AMGN's current multiple on earnings; the second is the savings that can be wrung out of the combined company in both SG&A and R&D (ONXX is not exactly lean) plus some NOL's, and the third is the projections on Nexxar, Kyprolis and their royalty from the PFE drug.

In any possible acquisition, one plausible scenario is that Bayer buys the balance of Nexxavar and some other company buys the other assets. That would likely yield a higher total price than other scenarios.

Peter