Pharma Updates: Merck Bids To Acquire Amylin; JNJ’s HIV Drug Fails

Merck (NYSE:MRK) is vying with other pharmaceutical companies like Sanofi to acquire Amylin Pharmaceuticals. It has placed a bid of $25 for each Amylin share, valuing the company at nearly $4 billion. ^[1] There are other players expected to enter the bidding process that includes the likes of Pfizer, AstraZeneca, Roche, Takeda Pharmaceuticals and Bristol-Myers Squibb. On the other hand, Johnson & Johnson (NYSE:JNJ) failed to convince the U.S. FDA to allow marketing its 80o mg pill Prezista for HIV patients. ^[2]

We have a $41 price estimate for Merck, nearly 10% above current market price and a $72 price estimate for JNJ, which is nearly 15% above current market price.

See our complete analysis for: Johnson & Johnson|Merck

Amylin’s Diabetes drug

The reason for the gold rush towards Amylin is its recently approved type 2 diabetes drug Bydureon, first once weekly treatment for the indication. Amylin is a biopharmaceutical company with advanced therapies for the treatment of diabetes, obesity, and other metabolic diseases. It holds expertise in therapies for the medical condition Diabetes, which has rapidly growing incidences, especially in the emerging nations. Amylin’s expertise is paying of as it rolled out its second potentially successful drug Bydureon after Byetta. Byetta was also a commercially successful drug for type 2 diabetes.

The global diabetes market was estimated at $29.3 billion in 2010 and demonstrated 10% compound annual growth rate (CAGR) between 2003 and 2010. Within this market, 72% sales were contributed by the type 2 diabetes product, which is expected to grow from $21 billion in 2010 to $34 billion in 2017 at a CAGR of 7%. ^[3]

Pharmaceutical companies are not unaware of this opportunity and believe that at a $4 billion price tag for Amylin, it is a discount buy. The sale may not happen at such a cheap price as many other bidders are yet to post their bids and bidding war is on the cards. If Merck can pull off this acquisition, it will bolster its alimentary & metabolism drug segment which includes its blockbuster drugs Januvia and Janumet. We expect Merck to gain market share in this segment going forward.

The U.S. FDA has rejected JNJ’s application to market its HIV pill Prezista on account of insufficiency of information about the drug’s results. This failure will add to the list of worries for JNJ as its immunology segment is already estimated to lose market share in the next 3-4 years. Remicade and other immunology drugs contribute nearly 10% value to our price estimate and is of utmost importance to JNJ. FDA approved the 400-milligram version of Prezista  back in 2006, which will go off-patent in 2012. JNJ was trying to be able to make up for the decline in revenues post patent expiry of the earlier version by seeking approval for the 800 mg version, however, FDA gave it a hard time.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Sanofi, Merck reportedly place bids for Amylin, fiercepharma.com, May 29, 2012 [↩]
2. FDA turns down once-a-day version of J&J HIV pill, businessweek.com, May 29, 2012 [↩]
3. Diabetes Therapeutics Market to 2017 – Better Glycemic Control and Reduced Potential Risk of Hypoglycemia to Increase the Market Share of DPP-IV Inhibitors and GLP-1 Agonists, marketresearch.com, Feb 29, 2012 [↩]