- Amgen will pay Chinese oncology specialist BeiGene $2.7 billion for a 21% stake in a wide-ranging collaboration that will see BeiGene commercialize three marketed cancer drugs and up to 20 in development in China. BeiGene has a significant marketing presence in China thanks to its assumption of in-country rights for three Celgene drugs.
- Xgeva, Blincyto and Kyprolis will be the initial focus of the deal, with the two companies equally sharing profits and losses on sales of the drugs in China. Rights to two of the products will revert to Amgen after five and seven years.
- BeiGene will contribute up to $1.25 billion to the development of up to 20 Amgen pipeline projects, and in return will get Chinese commercial rights for at least seven years for any that get approved in the country. BeiGene shares were up 33% to $183.74 apiece in morning trading Friday.
In promoting the deal, Amgen executives noted China is the second-biggest market for pharmaceuticals, and in addition cancer will become a much bigger health issue as its population ages. Amgen had never launched a product in China before the cholesterol-lowering injection Repatha (evolocumab) went on the market their earlier this year.
In paying $2.7 billion for a 20.5% stake, Amgen valued BeiGene shares at a 36% premium to their 30-day average through Oct. 30. The investment allows Amgen to name a member to the BeiGene board of directors. Amgen will pay for the stake using available cash.
The deal gives Amgen access to a BeiGene commercial operation that currently numbers 700 employees.
The immediate impact is on Xgeva (denosumab), a treatment for patients with bone metastases, the only one of the three marketed Amgen drugs approved in China. Leukemia treatment Blincyto (blinatumomab) and multiple myeloma drug Kyprolis (carfilzomib) are in Phase 3 trials.
BeiGene has rights to one of those three for five years and a second for seven, after which they revert to Amgen.
Total sales of those three products were $3 billion in 2018, with Xgeva accounting for $1.8 billion of that total, so expansion in China should give them a boost.
The development side of the deal will give BeiGene rights in China for seven years for any of the 20 development-stage drugs that get approval, with the two companies equally sharing profits and losses. Rights will revert to all but six of them, although the deal specifies that the closely watched KRAS inhibitor AMG 510 will be one that will revert.
BeiGene will receive royalties on ex-China sales of all 20 of the drugs except for AMG 510. And on in-China sales in this set of drugs, BeiGene will continue to receive royalties for the ones that revert to Amgen.
Cantor Fitzgerald analyst Alethia Young praised the deal, saying it would take years and perhaps more than $2.7 billion to build a commercial presence like BeiGene's. In addition, it leaves plenty of cash available for other acquisitions, she said. Amgen had $11.4 billion in cash as of Sept. 30.
For BeiGene, the deal improves its commercial presence and makes it less vulnerable to potential setbacks from its lead project zanubrutinib or other pipeline assets, Piper Jaffray analyst Tyler Van Buren wrote in an Oct. 31 note to clients.