Bristol-Myers Squibb (BMS) intends to take over ZymoGenetics for approximately $885 million, or about $735 million net of cash acquired. BMS thus obtains full ownership of a Phase II hepatitis C therapy that it has been developing with ZymoGenetics since January 2009.
BMS will pay $9.75 per share in cash, an almost 84% premium on yesterday’s closing price of $5.30. Both companies’ boards of directors have approved the deal, and shareholders holding roughly 37% of ZymoGenetics’ common stock have entered into agreements supporting the transaction.
“The acquisition of ZymoGenetics brings us full ownership of a promising investigational biologic that strengthens our very diversified hepatitis C portfolio,” notes Lamberto Andreotti, CEO, BMS. “In addition, ZymoGenetics brings proven capabilities with therapeutic proteins and revenue from a marketed specialty surgical biologic.”
The hep C therapy under investigation by the firms is a pegylated-interferon lambda treatment. Four-week and twelve-week results from a Phase IIa study will be presented at the American Association for the Study of Liver Diseases meeting later this year.
BMS also gains Recothrom®, an FDA-approved recombinant thrombin for use as a topical hemostat to control nonarterial bleeding during surgical procedures. Net sales were $29.6 million for the full year 2009. During the second quarter of 2010, the product made $11.9 million in sales compared to $6.0 million in the same period last year.
ZymoGenetics’ clinical pipeline is led by IL-21 protein, a cytokine being tested in an open-label, Phase II study as an immunotherapy treatment for metastatic melanoma. Preclinical studies include six biologic drug candidates including an anti-IL-31 antibody in development for atopic dermatitis.
The company also has seven outlicensed investigational compounds in various stages of clinical development. Four are partnered with Merck Serono and three with Novo Nordisk. BMS says that it stands to earn milestone and royalty payments from six of these programs.
Novo Nordisk in-licensed intellectual property rights to IL-21 antibodies outside North America in 2001 and in December 2009 paid $24 million for worldwide rights. Novo Nordisk agreed to pay up to $157.5 million and royalties on net sales as the molecules progress in development for autoimmune and inflammatory diseases. BMS will receive $1.5 million upon filing an IND application and $8.5 million at the start of Phase I studies.
ZymoGenetics’ deal with Merck Serono began in 2001. It focused on candidates for autoimmune diseases that targeted TACI and BCMA, regulators of the immune system and cell-surface receptors found on B-lymphocytes. Under the terms of the agreement, ZymoGenetics and now BMS could receive license fees and milestone payments of up to $52.5 million linked to the development and approval of products.
Initially, the transaction is expected to be modestly dilutive to earnings per share for Bristol-Myers Squibb. In 2010, the transaction is expected to be dilutive to EPS by approximately $0.03. In 2011, the transaction is expected to be dilutive to EPS by approximately $0.07.