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Bloomberg, the exclusive media outlet of Amylin Pharmaceuticals' (Nasdaq: AMLN ) rumor-leaking department, published a report on Friday that Sanofi and Merck (NYSE: MRK ) have put in bids to buy the biotech.
I've gone from not knowing if Amylin was leaking the information when Bloomberg reported that Bristol-Myers Squibb (NYSE: BMY ) had made a $22-per-share offer, to being pretty certain once the bidding process began, to being downright certain that Amylin is ultimately responsible for the leaks through its bankers.
The news sent shares up 8% on Friday, but the leak of information by "three people familiar with the process" wasn't designed for investors' ears. Assuming Bloomberg wasn't able to convince three people to risk their jobs talking to the media, the "leak" was a calculated move to let other potential bidders know that they need to top the "at least $25 a share" that Sanofi and Merck reportedly offered.
It could be giant bluff, but in the game of M&A poker, bluffing is dangerous because the companies can talk to each other about the cards they're holding. If Sanofi and Merck didn't make offers, I'd be willing to guess they'd be pissed off enough to inform the other bidders they weren't in the process. They're probably not all that happy about being outed in public about their bid, but Amylin isn't here to make friends, it's trying to get the highest bidder.
Investors aren't actively playing the poker match, and there aren't any cameras to see what cards each company holds, but we can make some educated guesses.
Amylin best fits with Merck, Sanofi and Takeda, with AstraZeneca (NYSE: AZN ) and Bristol not far behind. This purchase should be more about cutting costs than it is about growing sales of Amylin's diabetes drugs, so the acquirer needs to have an established diabetes franchise. Merck already has sales reps hocking Januvia, Sanofi has insulins Aprida and Lantus, and Takeda sells Actos, making Amylin's Byetta, Bydureon, and Symlin a good fit.
Bristol and AstraZeneca sell Onglyza together and are developing another diabetes drug, dapagliflozin, which isn't quite ready for U.S. approval. It's not really clear to me whether it would be beneficial for either company to buy Amylin separately, but I can see how furthering their joint venture by buying Amylin together would make sense.
For Pfizer (NYSE: PFE ) and Roche, which have reportedly signed confidentiality, buying looks like a move to build a sales force as they develop the diabetes drugs in their pipelines. Both are well established companies; I doubt they'll pay a premium for the drugs.
Guessing which company might be most interested is relatively easy; guessing what the final price will be is considerably harder. Shares closed Friday near $28, potentially well above the reported offers of "at least $25 a share."
A sale of Amylin looks all but certain at this point, but that doesn't necessarily make it a good buy. Just because investors are bidding up the price doesn't make an even higher price a foregone conclusion. A take-under -- a guaranteed bid at a price under the current price with a contingent value rights, or CVR, based on Amylin's drugs reaching certain sales milestones -- seems like a real possibility at this point.