Kosan Acquired by Bristol-Myers for 233% Premium

Rumors about Bristol-Myers Squibb (BMY) being acquired by a larger drug maker have been floating around for some time now but Thursday, BMY gets to play the big pocketbook.

BMY and Kosan (KOSN) announced that they have signed a merger agreement for $5.50 per share (a 233% premium over Kosan’s previous day closing price of $1.65) in cash. After deducting the roughly $40M cash Kosan has in the bank, the price tag for BMS will touch $190 million.

The acquisition should enhance Bristol-Myers Squibb’s clinical stage pipeline with compounds in two classes of cancer therapeutics:

Hsp90 Inhibitors: [KOS-953, phase 2 in multiple myeloma and HER2+ breast cancer] Hsp90 is involved in the proper folding of many cancer-related proteins. Inhibition of this target in clinical trials has been shown to re-sensitize cancer cells to drugs which they have become resistant and may be relevant to a wide variety of cancers.
Epothilones: [KOS-1584, phase 1 in NSCLC] The mechanism of disrupting microtubule function as a cancer therapeutic isn’t new. The taxanes are among the most widely used and effective anticancer drugs on the market. Kosan’s epothilone utilizes a similar mechanism of action as the taxanes and has the potential to be used in both taxane sensitive and taxane-resistant cancers.

Some might say that this small acquisition, along with it’s alliance with KAI for KAI-9803, tips BMS’s hand and that they have chosen to go it alone, rather than take the mega-merger route. I still disagree. BMS has divested two large businesses in ConvaTec and Lantheus for just shy of $5 billion. Dropping 4% of that total in two transactions hardly makes the case against a mega-merger. In addition, both transactions in the last month have only strengthened the pipeline and added to the M&A fodder.

Something has to give, BMS loses patent exclusivity (and probably +$3B in sales) for Plavix in 2009. The next 12 months will reveal the path for BMS. Stay tuned.

Comments

[no name]

Eben Tessari - The stock symbol for this article is wrong: BMS is the symbol for The Bemis Co.; not a drug company.

2008 Jun 17 03:10 PM

[Leser]

Can't this article be edited?
It's about a month since "no name" commented on the mistake of putting in BMS for BMY and people are still accessing the article and getting a bit confused by the inaccuracies of the first paragraph.
Also, the company name should have appeared with the first use of the stock symbol, not using the symbol instead of the name in the introductory sentence.

2008 Jul 14 12:23 PM

[Eben Tessari]

I've said it before... I'll say it again.... I can't edit this and I'm not the one adding the stock symbol information. I write on a personal blog (pharmababble.com) that seeking alpha syndicates. They add the ticker info.

Seeking alpha messed up the symbol, not me.

2008 Jul 21 08:21 AM