Bristol-Myers Squibb announced July 22 that it will buy State Road-based biopharma firm Medarex for $2.4 billion, in a deal that nearly doubles the value of the latter’s shares.

Medarex, which develops medicines to combat debilitating diseases, was trading at $8.40 a share when the market closed on July 22. Shortly thereafter BMS, the world’s 15th largest pharmaceutical seller, announced that it would buy Medarex for $16 a share. Medarex’s projected $300 million in net cash and marketable securities at closing would be an asset acquired by Bristol-Myers Squibb, effectively making the purchase price approximately $2.1 billion.

The two companies had been working to the develop cancer drug ipilimumab, which recently stirred stock market interest when Medarex announced that the drug had markedly reduced the size of prostate cancer tumors by generating antibodies. A Phase III research drug, ipilimumab has been developed for treatment of skin cancer. For BMS the deal could re-establish the drug maker as a preeminent source of anti-cancer medications.

According to the Wall Street Journal, the deal comes on the cusp of BMS divesting itself of non-pharmaceutical assets, such as wound care, in favor of fortifying its portfolio of specialty drugs. The deal also comes at a fortuitous time, as large biopharmas worldwide are losing patent protections. Smaller firms, concentrating on more focused areas, have made advances large firms have been unable to match in recent years, and working with smaller firms has been good for both sides. Larger firms get access to specialty drugs, and small firms get the backing of research dollars.

BMS used this dynamic in defending the cost of the buyout, when in a statement it announced, "Medarex represents what we’re looking for in terms of our ‘string of pearls’ strategy. This acquisition is another important step in our BioPharma transformation."

According to a statement by Medarex, Bristol-Myers Squibb gains Medarex’s UltiMAb Human Antibody Development System, which produces fully human antibodies for multiple therapeutic areas, including immunology and oncology; Medarex’s next-generation antibody-drug conjugate technology, a proprietary platform that could open new fields in oncology drug development; the rights to seven antibodies in clinical trials under Medarex’s sole sponsorship and three other antibodies being co-developed with other partners; the rights to pre-clinical assets in various stages of development by Medarex, particularly monoclonal antibodies focused in oncology and immunology; full ownership of ipilimumab; and royalties based on the sales of drugs SIMPONI, STELARA and ILARIS.

The deal boosts Medarex, which posted a $10 million first-quarter value in March, before the buzz about its advance on prostate cancer got out. Such an exorbitant price, according to some industry watchdogs, shows how desperate large pharma is for new specialty drug pipelines. In big pharma’s push to expand and diversify, such pipelines have been strangled in favor of growth and acquisition.

The deal comes on the heels of Medarex’s announcement that the company would receive "a milestone payment of an undisclosed amount" from a licensing partner in connection with clinical trials for a diabetes and advanced kidney disease medicine.

Medarex spokeswoman Nichol Ochsner said that the cash tender offer is expected to occur on or about July 27. The companies expect the tender offer to close in approximately in 30 days after commencement of the tender offer, she said.

Whether the company will move from State Road or whether there will be layoffs is not yet known.

Medarex was started in 1987 by Donald Drakeman, a researcher who also earned a Ph.D. in religion from Princeton University, as a one-man operation on Nassau Street to research cancer treatments. Drakeman headed the company for nearly 20 years, building it into a healthy company known for its research with transgenic mice able to create fully human antibodies.

Drakeman, a Dartmouth graduate who also has a law degree from Columbia, resigned from Medarex in 2006 after news of an internal investigation into stock options practices dating back to 1996. Board member Michael Appelbaum, a former CFO at Medarex, also stepped down.

Drakeman’s wife, Lisa Drakeman, is CEO of GenMab on North Harrison Street. The biotech began as a sister company to Medarex, based in Denmark, but is mostly unaffiliated. Medarex still owns 5 percent of GenMab, but GenMab does not benefit from the BMS deal.

Medarex (MEDX) 707 State Road, Princeton 08540; 609-430-2880; fax, 609-430-2850. Howard H. Pien, president and CEO. Home page: www.medarex.com.

Related stories:

http://princetoninfo.com/index.php?option=com_us1more&key=09-16-92%20medarex

http://princetoninfo.com/index.php?option=com_us1more&Itemid=6&key=11-08-2006_f_01

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