Amgen Inc (AMGN.O), the world's largest biotechnology company, said on Thursday it would pay $1.16 billion to buy Micromet Inc MITI.O, in a deal that would give it access to a novel cancer treatment technology.
Amgen plans to pay $11 per share in cash for Micromet, a premium of nearly 33 percent to the smaller firm's closing price on Wednesday. The two companies had already signed a drug development deal in July.
Analysts said Amgen's offer fairly valued Micromet, given that it does not have an approved product on the market, but has a novel technology that could lead to multiple applications.
"Overall, we believe the acquisition makes strategic sense, expanding Amgen's existing oncology pipeline, and provides a broad validated technology platform," J.P. Morgan analyst Geoff Meacham wrote in a note.
Large biotechnology and pharmaceutical companies have been looking to beef up their dwindling pipeline by acquiring promising drug candidates.
Amgen, which expects to close the deal in the first quarter, is betting on the Micromet's technology known as BiTE, which is designed to direct the body's cell-destroying T cells to attack tumor cells.
The technology has attracted the attention of large drugmakers such as Sanofi (SASY.PA), Boehringer Ingelheim and Bayer Schering Pharma, who have all entered into development partnerships with Micromet.
"I feel there is clearly value in the technology, which is novel, but I do feel that this has its own risk," ThinkEquity analyst Mani Mohindru said.
"(BiTe) may work better for some cancers, but may not add value in terms of commercialization in some other indications," she said.
Mohindru, however, said Micromet would have received a higher premium, if it had waited a little longer for more patient data.
ThinkEquity, which makes a market in Micromet, has a "buy" rating on the company and a $9 price target.
Founded in 1993, Micromet is developing several drug candidates based on BiTE. Its lead drug blinatumomab is in pivotal and mid-stage trials for various types of acute lymphoblastic leukemia.
Amgen, which will report its fourth quarter results after the close of the market, is being advised by Moelis & Company LLC and Sullivan & Cromwell LLP. Goldman, Sachs & Co. and Cooley LLP are providing financial and legal advice, respectively, to Micromet.
Micromet shares were trading at $10.93 midday Thursday, while Amgen shares were down 1 percent at $68.63, both on the Nasdaq market.
(Reporting by Michele Gershberg and Anand Basu; Editing by Derek Caney, Anthony Kurian)