News Article

Gilead Sciences Buys Myogen for $2.5 Billion
Date: Oct 02, 2006
Source: New York Times ( click here to go to the source)

Featured firm in this article: Gilead Sciences Inc of Foster City, CA

DENVER, Oct. 2 — Gilead Sciences, which makes drugs to treat H.I.V., announced plans on Monday to buy a rival, Myogen, for about $2.5 billion in cash, signaling its growing interest in developing pulmonary drugs.

Gilead, which is based in Foster City, Calif., said that it would pay Myogen shareholders $52.50 a share, a premium of 50 percent over Friday's closing price of $35.08. The announcement caught many off-guard, not only for the acquisition price but because it represented a shift for Gilead out of its area of expertise in infectious diseases.

An analyst at Sanford C. Bernstein & Company, Geoffrey Porges, said the offer indicated a possible bidding war for Myogen and reflected the scarcity of late-stage drugs in the pulmonary disease category.

The president and chief executive of Gilead, John C. Martin, told analysts on Monday in a conference call that the acquisition would help the company build on its $365 million buyout of privately held Corus Pharma in August.

"Our planned acquisition of Myogen represents both a scientific and strategic step," Mr. Martin said.

Myogen, which is based in the Denver suburb of Westminster, is developing a drug called ambrisentan to treat pulmonary arterial hypertension. It says it believes that information developed from two studies will support a drug application that it expects to file with the Food and Drug Administration by year's end.

An analyst at Argus Research, David Coleman, who has followed Myogen, said Gilead would probably be able to capitalize on the drug better than Myogen.

Myogen also markets a drug called Flolan for treatment of primary pulmonary hypertension and has a study for a drug that could treat resistant hypertension.

The deal is structured in two phases, with Myogen to become a wholly owned subsidiary of Gilead. Myogen's board has approved the deal, which is expected to close by the end of the year, pending regulatory and other standard approvals.

Gilead said the deal would increase earnings in 2007 and 2008. It does not expect Myogen to add to 2009 profit.

Gilead, a biotechnology company, discovered Tamiflu for the treatment of flu and a range of drugs to treat life-threatening infectious diseases such as H.I.V.

Gilead posted second-quarter net income of $265.2 million, or 56 cents a share, up 34 percent from $196 million, or 41 cents per share, in the previous second quarter. The company credited the jump to strong sales of its H.I.V. treatments.

Myogen posted a net loss of $18.5 million, or 44 cents a share, in the second quarter compared with a net loss of 21.7 million, or 61 cents a share, in the second quarter of 2005.

Myogen stock rose $16.36 a share yesterday, to $51.44.

Shares of Gilead dropped $4.49, to $64.28 a share.