Will Amgen's Purchase Of Onyx Prove To Be A Smart Move?

Amgen Inc. (AMGN) the world largest biotechnology company develops manufactures and markets products for the treatment and cure of cancer, nephrology and other disease primarily in the United States, Europe and Canada.

About Amgen

Amgen reported second quarter earnings on July 30th. Total revenues were $4.68 billion which was a 5% increase from the second quarter of 2012. Net income was $1.44 billion up 1% from a year ago. The earnings highlights were that the sales of its top selling drugs Neulasta/Neupogen was up 7%, and sales of Enbrel its second best selling drug were up 9%. While the earnings report showed that Amgen was once again profitable, there were no new products that could help to propel the company into the future.

Amgen's Future

As baby boomers become older developing medicines for the maintenance and treatment of cancer patients has become increasingly important. Amgen has several drugs that help patients cope with the side effects of cancer treatments, but no drugs that actually attack the cancers. There, blockbuster drugs Neulasta and Neupogen help to prevent infections in cancer patients that are undergoing chemotherapy, but they are not cures. What Amgen executives have wanted are treatments for the cure of cancer. On August 24th, Amgen executives got their wish when the Amgen announced that it would be getting larger.

Amgen had struck a deal to purchase Onyx Pharmaceutical (ONXX) for $10.4 billion in cash. Onyx is a biotech company that specializes in the development of drugs for the treatment and cure of cancer. At the time of the announcement, the company had a market cap of close to $9 billion with a stock price of around $117. Onyx had not been a financially successful company, in the second quarter it lost $53.2 million and in 2012 it lost $187.8 million. However despite its poor earnings its stock price has increased by over 70% in the last 52 weeks. The reason for its stocks success was the potential of its highly prized drug Kyprolis. Kyprolis received FDA approval in July of 2012, and it has been used as a late term treatment for a rare blood cancer called multiple myeloma.

When Amgen came public about the purchase, Robert A Bradway Amgen's CEO issued a statement in which he said, "Amgen has a unique opportunity to add value to Kyprolis, a product which is at an early and promising stage of its launch," Cancer treating drugs like Kyprolis are coveted because companies can charge patients high fees for them. For instance Kyprolis cost $10,000 for a 28 day cycle.

Sales of Kyprolis reached $125 million in the first six months of 2013, and analysts believe that its sales could grow to as high as $2 billion per year. While buying the patent for Kyprolis was the driving force behind Amgen's purchase of Onyx, the company received other valuable patents including the patent on Nexavar which treats liver and kidney cancer and Stivarga which treats colon cancer and gastrointestinal tumors.

While buying Onyx and its signature cancer treating drug Kyprolis looks like a great purchase for Amgen it was not without risk. For instance Kyprolis still has not been approved to be used in Europe or for early term treatment of multiple myeloma in the United States. In addition Celgene Corporation (CELG), a key competitor of Amgen's currently sells the blockbuster drug Revlimid which is currently the leading drug treatment for multiple myeloma. Revlimid is Celgene's top selling drug, and in the second quarter its sales totaled $1.5 billion. Revlimid which is also expensive to use, cost patients about $12,900 a month. Celgene has also begun selling a drug called Pomalyst which also treats multiple myeloma. Pomalyst which received FDA approval in February, had $66 million in second quarter sales.

Amgen's Finances

As of June 30th Amgen's balance sheet showed $22 billion in cash and equivalents. However, the company had to borrow $8.1 million in order to pay for the purchase of Onyx Pharmaceuticals. The reason that the company had to borrow so much money is because $19.2 billion of its cash is stranded in the accounts of its foreign subsidiaries. Amgen's accountants calculated that it would be cheaper to borrow the money than to repatriate cash and pay taxes. By the end of the third quarter, the company will be over $30 billion in debt. With the current low interest rates, that kind of debt is tolerable, but with rates moving higher carrying over $30 billion in debt could become a problem.

The company has a market cap of $87.8 billion, and its stock price is around $109. At its current valuations, price to earnings ratio 18.3 and price to book ratio 3.9 the stock is not cheap, but it is in the same neighborhood as competitors such as Novrtis AG (NVS) or Teva Pharmaceutical (TEVA) and less than Celgene, which has a price to earnings ratio of 39.8 and a price to book ratio of 10.8.

Conclusion

For several quarters Amgen's revenues have been relatively flat, and the company needed a catalyst to help boost its revenues and earnings. That is why I believe that its purchase of Onyx was an excellent decision. Kyprolis is just the start of Amgen's foray into developing and marketing treatments for the cure of cancers. Apparently other investors believe that it was an excellent decision also, because on the day that the purchase was announced Amgen's stock price rallied higher by $8.15 or 7.5% on extremely high volume. The jury is still out but I expect Amgen's stock to continue moving higher.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)

Business relationship disclosure: The article has been written by an Analyst at ResearchCows, ResearchCows is not receiving compensation for it (other than from Seeking Alpha). ResearchCows has no business relationship with any company whose stock is mentioned in this article. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the company's SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author's best judgment as of the date of publication, and are subject to change without notice.

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Will Amgen's Purchase Of Onyx Prove To Be A Smart Move?

Amgen Inc. (AMGN) the world largest biotechnology company develops manufactures and markets products for the treatment and cure of cancer, nephrology and other disease primarily in the United States, Europe and Canada.

About Amgen

Amgen reported second quarter earnings on July 30th. Total revenues were $4.68 billion which was a 5% increase from the second quarter of 2012. Net income was $1.44 billion up 1% from a year ago. The earnings highlights were that the sales of its top selling drugs Neulasta/Neupogen was up 7%, and sales of Enbrel its second best selling drug were up 9%. While the earnings report showed that Amgen was once again profitable, there were no new products that could help to propel the company into the future.

Amgen's Future

As baby boomers become older developing medicines for the maintenance and treatment of cancer patients has become increasingly important. Amgen has several drugs that help patients cope with the side effects of cancer treatments, but no drugs that actually attack the cancers. There, blockbuster drugs Neulasta and Neupogen help to prevent infections in cancer patients that are undergoing chemotherapy, but they are not cures. What Amgen executives have wanted are treatments for the cure of cancer. On August 24th, Amgen executives got their wish when the Amgen announced that it would be getting larger.

Amgen had struck a deal to purchase Onyx Pharmaceutical (ONXX) for $10.4 billion in cash. Onyx is a biotech company that specializes in the development of drugs for the treatment and cure of cancer. At the time of the announcement, the company had a market cap of close to $9 billion with a stock price of around $117. Onyx had not been a financially successful company, in the second quarter it lost $53.2 million and in 2012 it lost $187.8 million. However despite its poor earnings its stock price has increased by over 70% in the last 52 weeks. The reason for its stocks success was the potential of its highly prized drug Kyprolis. Kyprolis received FDA approval in July of 2012, and it has been used as a late term treatment for a rare blood cancer called multiple myeloma.

When Amgen came public about the purchase, Robert A Bradway Amgen's CEO issued a statement in which he said, "Amgen has a unique opportunity to add value to Kyprolis, a product which is at an early and promising stage of its launch," Cancer treating drugs like Kyprolis are coveted because companies can charge patients high fees for them. For instance Kyprolis cost $10,000 for a 28 day cycle.

Sales of Kyprolis reached $125 million in the first six months of 2013, and analysts believe that its sales could grow to as high as $2 billion per year. While buying the patent for Kyprolis was the driving force behind Amgen's purchase of Onyx, the company received other valuable patents including the patent on Nexavar which treats liver and kidney cancer and Stivarga which treats colon cancer and gastrointestinal tumors.

While buying Onyx and its signature cancer treating drug Kyprolis looks like a great purchase for Amgen it was not without risk. For instance Kyprolis still has not been approved to be used in Europe or for early term treatment of multiple myeloma in the United States. In addition Celgene Corporation (CELG), a key competitor of Amgen's currently sells the blockbuster drug Revlimid which is currently the leading drug treatment for multiple myeloma. Revlimid is Celgene's top selling drug, and in the second quarter its sales totaled $1.5 billion. Revlimid which is also expensive to use, cost patients about $12,900 a month. Celgene has also begun selling a drug called Pomalyst which also treats multiple myeloma. Pomalyst which received FDA approval in February, had $66 million in second quarter sales.

Amgen's Finances

As of June 30th Amgen's balance sheet showed $22 billion in cash and equivalents. However, the company had to borrow $8.1 million in order to pay for the purchase of Onyx Pharmaceuticals. The reason that the company had to borrow so much money is because $19.2 billion of its cash is stranded in the accounts of its foreign subsidiaries. Amgen's accountants calculated that it would be cheaper to borrow the money than to repatriate cash and pay taxes. By the end of the third quarter, the company will be over $30 billion in debt. With the current low interest rates, that kind of debt is tolerable, but with rates moving higher carrying over $30 billion in debt could become a problem.

The company has a market cap of $87.8 billion, and its stock price is around $109. At its current valuations, price to earnings ratio 18.3 and price to book ratio 3.9 the stock is not cheap, but it is in the same neighborhood as competitors such as Novrtis AG (NVS) or Teva Pharmaceutical (TEVA) and less than Celgene, which has a price to earnings ratio of 39.8 and a price to book ratio of 10.8.

Conclusion

For several quarters Amgen's revenues have been relatively flat, and the company needed a catalyst to help boost its revenues and earnings. That is why I believe that its purchase of Onyx was an excellent decision. Kyprolis is just the start of Amgen's foray into developing and marketing treatments for the cure of cancers. Apparently other investors believe that it was an excellent decision also, because on the day that the purchase was announced Amgen's stock price rallied higher by $8.15 or 7.5% on extremely high volume. The jury is still out but I expect Amgen's stock to continue moving higher.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)

Business relationship disclosure: The article has been written by an Analyst at ResearchCows, ResearchCows is not receiving compensation for it (other than from Seeking Alpha). ResearchCows has no business relationship with any company whose stock is mentioned in this article. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the company's SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author's best judgment as of the date of publication, and are subject to change without notice.

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Smart Map launch offers new approach in the battle against Britain's biggest cancer killer, UK

Main Category: Lung Cancer
Also Included In: IT / Internet / E-mail
Article Date: 31 Jul 2013 - 1:00 PDT Current ratings for:
Smart Map launch offers new approach in the battle against Britain's biggest cancer killer, UK

Lung cancer patients can now check they are getting the best care available after the launch of a new interactive online map.

Roy Castle Lung Cancer Foundation (RCLCF) announced the launch today of its Lung Cancer Smart Map, which shows patients how treatment in their area compares against government targets.

Dr Jesme Fox, Medical Director at the RCLCF said: "There may be many reasons why some areas aren't meeting national standards but the point of this map is to give patients the power to ask why.

"We hope that the Smart Map will encourage patients to work with their doctors in making sure they get the best care available."

Dr Michael Peake, Clinical Lead for the National Lung Cancer Audit (NLCA), said: "The Lung Cancer Smart Map is a great way to make our data on the quality and outcomes of lung cancer services across the UK easily available and easily understandable to the general public. Patients and their families have a right to know what information is 'out there' on the hospitals in which they might be treated and this map is an excellent example of how that can be achieved."

Public health minister Anna Soubry said: "This interactive cancer map is a great source of information which empowers lung cancer patients to make better informed choices about the care and treatment they receive.

"I'd like to commend the Foundation's commitment to diagnosing lung cancer earlier and identifying the best treatments available in order to save as many lives as possible."

Please click on the following link to view the map

The Smart Map includes the latest regional data from a range of measures recorded in the NLCA. It compares local real-world hospital data to the nationally recommended standards of care.[1] Hospitals have made consistent progress in treating lung cancer since the NLCA audit began in 2004 but there is still significant room for improvement and it's hoped that sharing this information will accelerate future positive change.

It is hoped that the Smart Map can also encourage improvements in timely referral from primary care. It includes local data from the National Cancer Intelligence Network's (NCIN) "Routes to Diagnosis" study which showed that lung cancer patients who are diagnosed via a managed referral rather than an emergency admission have improved outcomes.[2]

The development of the map was supported by Roche Products Ltd.

The National Lung Cancer Audit is the most comprehensive review of lung cancer services that has been undertaken in the UK. The latest published audit used data collected on 38,528 patients first seen in 2011 in Great Britain, representing approximately 93% of the expected number of new lung cancer cases. This is thought to represent almost all cases of lung cancer presenting to hospital.[1]

The audit, which began eight years ago, has helped drive improvements in care by providing hospital trusts with vital information about their performance and how they compare to others. The audit is managed by The NHS Information Centre in partnership with the Royal College of Physicians and is commissioned by the Healthcare Quality Improvement Partnership.

The NCIN Routes to Diagnosis study examined the sequence of events leading to every cancer diagnosis made in England between 2006 and 2008.[3] The total number of lung cancer cases evaluated in this study over the three year period equates to 96,735. In the RCLCF Smart Map, lung cancer specific data from the study is grouped to show the percentage of diagnoses made via 'managed', 'emergency presentation' and 'other' routes. The 'managed' route encompasses patients who presented through the two week wait, GP referral, plus other outpatient and inpatient elective routes.

Lung cancer is Britain's biggest cancer killer with approximately 41,500 new cases diagnosed each year.[4] Of these patients, about 30% will survive a year and only about 8% will survive five years.[5],[6] Lung cancer kills almost 4,000 more women every year than breast cancer and accounts for more male cancer deaths than prostate, pancreatic and stomach cancer combined.[7]

Article adapted by Medical News Today from original press release. Click 'references' tab above for source.
Visit our lung cancer section for the latest news on this subject.

[1] National Lung Cancer Audit Report 2012

[2] National Cancer Intelligence Network. Routes to Diagnosis – NCIN Data Briefing (Last accessed May 2013)

[3] National Cancer Intelligence Network. Routes to Diagnosis, 2006-2008 (Last accessed May 2013)

[4] Cancer Research UK. Lung Cancer Incidence Statistics(Last accessed May 2013)

[5] Office of National Statistics. Cancer Survival in England - Patients Diagnosed 2005-2009 and Followed up to 2010 (Last accessed May 2013)

[6] Roy Castle Lung Cancer Foundation. Lung Cancer Facts and Figures (Last accessed May 2013)

[7] Cancer Research UK. Cancer mortality for common cancers (Last accessed May 2013)

Roy Castle Lung Cancer Foundation

Please use one of the following formats to cite this article in your essay, paper or report:

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Roy Castle Lung Cancer Foundation. "Smart Map launch offers new approach in the battle against Britain's biggest cancer killer, UK." Medical News Today. MediLexicon, Intl., 31 Jul. 2013. Web.
31 Jul. 2013. APA

Please note: If no author information is provided, the source is cited instead.

'Smart Map launch offers new approach in the battle against Britain's biggest cancer killer, UK'

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View the original article here

Smart Map launch offers new approach in the battle against Britain's biggest cancer killer, UK

Main Category: Lung Cancer
Also Included In: IT / Internet / E-mail
Article Date: 31 Jul 2013 - 1:00 PDT Current ratings for:
Smart Map launch offers new approach in the battle against Britain's biggest cancer killer, UK

Lung cancer patients can now check they are getting the best care available after the launch of a new interactive online map.

Roy Castle Lung Cancer Foundation (RCLCF) announced the launch today of its Lung Cancer Smart Map, which shows patients how treatment in their area compares against government targets.

Dr Jesme Fox, Medical Director at the RCLCF said: "There may be many reasons why some areas aren't meeting national standards but the point of this map is to give patients the power to ask why.

"We hope that the Smart Map will encourage patients to work with their doctors in making sure they get the best care available."

Dr Michael Peake, Clinical Lead for the National Lung Cancer Audit (NLCA), said: "The Lung Cancer Smart Map is a great way to make our data on the quality and outcomes of lung cancer services across the UK easily available and easily understandable to the general public. Patients and their families have a right to know what information is 'out there' on the hospitals in which they might be treated and this map is an excellent example of how that can be achieved."

Public health minister Anna Soubry said: "This interactive cancer map is a great source of information which empowers lung cancer patients to make better informed choices about the care and treatment they receive.

"I'd like to commend the Foundation's commitment to diagnosing lung cancer earlier and identifying the best treatments available in order to save as many lives as possible."

Please click on the following link to view the map

The Smart Map includes the latest regional data from a range of measures recorded in the NLCA. It compares local real-world hospital data to the nationally recommended standards of care.[1] Hospitals have made consistent progress in treating lung cancer since the NLCA audit began in 2004 but there is still significant room for improvement and it's hoped that sharing this information will accelerate future positive change.

It is hoped that the Smart Map can also encourage improvements in timely referral from primary care. It includes local data from the National Cancer Intelligence Network's (NCIN) "Routes to Diagnosis" study which showed that lung cancer patients who are diagnosed via a managed referral rather than an emergency admission have improved outcomes.[2]

The development of the map was supported by Roche Products Ltd.

The National Lung Cancer Audit is the most comprehensive review of lung cancer services that has been undertaken in the UK. The latest published audit used data collected on 38,528 patients first seen in 2011 in Great Britain, representing approximately 93% of the expected number of new lung cancer cases. This is thought to represent almost all cases of lung cancer presenting to hospital.[1]

The audit, which began eight years ago, has helped drive improvements in care by providing hospital trusts with vital information about their performance and how they compare to others. The audit is managed by The NHS Information Centre in partnership with the Royal College of Physicians and is commissioned by the Healthcare Quality Improvement Partnership.

The NCIN Routes to Diagnosis study examined the sequence of events leading to every cancer diagnosis made in England between 2006 and 2008.[3] The total number of lung cancer cases evaluated in this study over the three year period equates to 96,735. In the RCLCF Smart Map, lung cancer specific data from the study is grouped to show the percentage of diagnoses made via 'managed', 'emergency presentation' and 'other' routes. The 'managed' route encompasses patients who presented through the two week wait, GP referral, plus other outpatient and inpatient elective routes.

Lung cancer is Britain's biggest cancer killer with approximately 41,500 new cases diagnosed each year.[4] Of these patients, about 30% will survive a year and only about 8% will survive five years.[5],[6] Lung cancer kills almost 4,000 more women every year than breast cancer and accounts for more male cancer deaths than prostate, pancreatic and stomach cancer combined.[7]

Article adapted by Medical News Today from original press release. Click 'references' tab above for source.
Visit our lung cancer section for the latest news on this subject.

[1] National Lung Cancer Audit Report 2012

[2] National Cancer Intelligence Network. Routes to Diagnosis – NCIN Data Briefing (Last accessed May 2013)

[3] National Cancer Intelligence Network. Routes to Diagnosis, 2006-2008 (Last accessed May 2013)

[4] Cancer Research UK. Lung Cancer Incidence Statistics(Last accessed May 2013)

[5] Office of National Statistics. Cancer Survival in England - Patients Diagnosed 2005-2009 and Followed up to 2010 (Last accessed May 2013)

[6] Roy Castle Lung Cancer Foundation. Lung Cancer Facts and Figures (Last accessed May 2013)

[7] Cancer Research UK. Cancer mortality for common cancers (Last accessed May 2013)

Roy Castle Lung Cancer Foundation

Please use one of the following formats to cite this article in your essay, paper or report:

MLA

Roy Castle Lung Cancer Foundation. "Smart Map launch offers new approach in the battle against Britain's biggest cancer killer, UK." Medical News Today. MediLexicon, Intl., 31 Jul. 2013. Web.
31 Jul. 2013. APA

Please note: If no author information is provided, the source is cited instead.

'Smart Map launch offers new approach in the battle against Britain's biggest cancer killer, UK'

Please note that we publish your name, but we do not publish your email address. It is only used to let you know when your message is published. We do not use it for any other purpose. Please see our privacy policy for more information.

If you write about specific medications or operations, please do not name health care professionals by name.

All opinions are moderated before being included (to stop spam). We reserve the right to amend opinions where we deem necessary.

Contact Our News Editors

For any corrections of factual information, or to contact the editors please use our feedback form.

Please send any medical news or health news press releases to:

Note: Any medical information published on this website is not intended as a substitute for informed medical advice and you should not take any action before consulting with a health care professional. For more information, please read our terms and conditions.

View the original article here