M&A

BMS Acquires Kosan Biosciences for 233% Premium

Rumors about BMS being acquired by a larger drug maker have been floating around for some time now but today, BMS gets to play the big pocketbook.

BMS and Kosan 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.

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