Amgen (AMGN) said Thursday it will spend $ 1.9 billion to buy Five Prime Therapeutics (FPRX), a small biotechnology company with a promising stomach cancer drug. The news caused FPRX’s stock to skyrocket.
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The deal includes bemarituzumab, a potential treatment for stomach cancer ready to begin Phase 3 testing, Amgen said in a press release. Amgen Chief Executive Robert Bradway, in a written statement, called the acquisition of Five Prime an “attractive opportunity”.
The deal values FPRX shares with a 79% premium compared to the previous close, said Geoffrey Porges, an analyst at SVB Leerink, in a report to clients. This is reasonable, given that Five Prime is in the final stage of development of bemarituzumab. But it may not be Amgen’s last acquisition this year.
“The purchase of Five Prime is a relatively small transaction for Amgen in relation to our expectations for the year and Amgen’s capabilities (for mergers and acquisitions),” he said. “Therefore, we believe that there may be more to come to further build the pipeline.”
FPRX shares rise on acquisition
In the stock market today, FPRX’s shares fell 78.7% to 38. Amgen’s shares plunged 0.9% to 221.91.
Under the terms of the agreement, Amgen will initiate a public offering to acquire all outstanding shares of FPRX for $ 38 per share. After the cash deal is closed, a wholly-owned subsidiary of Amgen will merge with Five Prime. The deal is expected to close in the second quarter.
Gastric cancer is the third leading cause of cancer death worldwide and is particularly prevalent in the Asia-Pacific region. Amgen plans to use its presence in Japan and the Asia-Pacific region to help boost the potential of bemarituzumab.
Five Prime has a development and marketing agreement with China Zai Lab (ZLAB) for the drug. In conjunction with the acquisition, Amgen will receive royalties 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 manufacturing capabilities to provide additional clinical materials, as well as expanded production quantities, to realize the full potential of bemarituzumab until even more patients around the world as quickly as possible, “said Bradway of Amgen.
Targeting a specific protein
Bemarituzumab targets a specific protein that appears abundantly in 30% of stomach cancer cases that are not associated with another protein called HER2.
In an intermediate-stage study, treatment with bemarituzumab prolonged the period of time before patients worsened. It also resulted in an improved overall response rate.
Another analysis showed a positive correlation between the amount of protein in the tumor cells and the drug’s effectiveness. This suggests that bemarituzumab may have a role to play in lung, breast, ovarian and other cancers. But FPRX’s shares plunged nearly 11% that day.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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