Amgen (AMGN) agreed to buy Chemo Centryx (CCXI) for $3.7 billion on Thursday, sending CCXI shares soaring.
ChemoCentryx focuses on rare and orphan diseases, particularly in the autoimmune, inflammatory and cancer areas. It recently gained approval from the Food and Drug Administration for Tavneos, a treatment for inflammation in the blood vessels.
And the biggest biotech company wants ChemoCentryx under its umbrella.
“The acquisition of ChemoCentryx represents a compelling opportunity for Amgen to build on our decades-long leadership in inflammation and nephrology with Tavneos, a first-in-class, transformative treatment for anti-neutrophil cytoplasmic autoantibody-associated vasculitis,” said Robert, CEO of Amgen. Bradway said in a written statement.
In today’s stock market, shares of CCXI soared 109.2% to close at 50.43, just below the purchase price of $52 per share. Amgen shares were slightly lower at 246.98.
CCXI Stocks: A Huge Premium
In addition to Tavneos, Amgen has access to three early-stage drugs. The company is also testing Tavneos in patients with a rare kidney disease and a condition that causes small, painful lumps to form under the skin. Amgen paid a 116% premium to the closing price of CCXI shares on Wednesday.
The acquisition helps Amgen fill a void as its most important drugs begin to face generic competition, SVB Securities analyst David Risinger said in a report to clients. Several key products will face generic rivals from 2025-30 when their patents expire. Risinger doesn’t think Amgen’s existing portfolio is enough to contain losses.
“With the exclusivity of Tavneos in the US until 2036 (if the patent extension is granted) and the potential for the drug to expand to multiple complement-mediated indications, we believe this transaction is a significant step in filling that gap.” , said.
Risinger forecasts more than $2 billion in sales from Tavneos in 2030. The deal is expected to close in the fourth quarter.
Amgen is a ‘logical partner’
SVB Securities analyst Joseph Schwartz says the deal is fair value for investors in CCXI shares. As of Wednesday’s close, shares were down 34% year-to-date. SPDR S&P Biotech exchange-traded fund (XBI) was down 25%.
Schwartz says he has long viewed ChemoCentryx as a takeover target, noting AstraZeneca (AZN) set a precedent when it acquired Alexion Pharmaceuticals. Alexion was working on a similar set of treatments for rare diseases.
“We see Amgen as a logical partner to pick up the torch from ChemoCentryx and continue to launch Tavneos in Anca-associated vasculitis, as well as capitalize on earlier stage opportunities,” he said. “ChemoCentryx should benefit from Amgen’s deep experience in the inflammation and nephrology space.”
It maintained its superior rating on CCXI shares.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
YOU MAY ALSO LIKE:
How Siga Is Turning Her Biological Warfare Soldier In This Outbreak… And The Next One
Eli Lilly Slashes Guidance After ‘Significantly’ Missing Quarterly Estimates; diving actions
Options trading: how to start using options, how to manage risk
IBD Digital: Unlock IBD’s Premium Stock Listings, Tools & Analysis Today
Looking for the next big winners in the stock market? Get started with these 3 steps