Please ensure Javascript is enabled for purposes of website accessibility

Buyout Rumor Has Investors' Blood Sugar Pumping

By Brian Orelli, PhD – Updated Apr 7, 2017 at 6:04PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Amylin is playing hard to get.

According the Bloomberg News, Bristol-Myers Squibb (NYSE: BMY) made an unsolicited offer to buy Amylin Pharmaceuticals (Nasdaq: AMLN) for $22 per share. Investors are eating it up, sending the diabetes drugmaker up 54% yesterday.

Assuming Bloomberg's sources are telling the truth, it's likely they were ordered by their bosses to leak the info; these things are rarely just a couple of people bragging to a reporter. The question is, which side of the aisle did the leaks come from? Did Amylin put it out there looking for a higher bid, or is Bristol-Myers trying to gain some leverage through the leak?

With shares trading substantially above the rumored offer price, investors are clearly expecting something better to come along, but I wouldn't hold my breath waiting for a substantially higher bid from Bristol-Myers. The pharma has shown willingness to make purchases, but not at exuberant prices. For example, Bristol-Myers made an unsolicited offer to buy ImClone Systems a few years ago for a low-balled $60 per share. The pharma did eventually up its offer, but only by a measly 3.3% to $62. Eli Lilly (NYSE: LLY) eventually stepped in and bought the biotech for $70 per share.

Eli Lilly isn't going to come to Amylin's rescue like it did for ImClone. The two were partners on Byetta and Bydureon before Eli Lilly found a new beau and asked for a divorce. Diabetes specialist Novo Nordisk (NYSE: NVO) is out, too, since it sells Victoza, the most direct competitor to Byetta and Bydureon.

That leaves Merck, which sells blockbuster Januvia, and Sanofi (NYSE: SNY), which sells Lantus, a type of insulin, as potential white knights. AstraZeneca could also be a possibility, but getting in a bidding war with Bristol-Myers would be complicated since the two are partners on diabetes drugs dapagliflozin and Onglyza.

Given the lack of information about what potential bidders are thinking, it seems pretty risky to buy Amylin at this level. And there's always the possibility that Bristol-Myers leaked the rumor hoping to make it more difficult for Amylin to find a partner outside the U.S. to take over Eli Lilly's duties, which are set to transition to Amylin by the end of 2013. Not being able to find a partner would make Amylin less valuable, not more valuable, since it's more cost-effective to have someone else market the drugs overseas.

Fool analysts think these three American companies are set to dominate the world.

Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Eli Lilly and Company Stock Quote
Eli Lilly and Company
LLY
$321.55 (-0.56%) $-1.80
Bristol Myers Squibb Company Stock Quote
Bristol Myers Squibb Company
BMY
$70.53 (-0.79%) $0.56
Sanofi Stock Quote
Sanofi
SNY
$39.19 (3.08%) $1.17
Novo Nordisk A/S Stock Quote
Novo Nordisk A/S
NVO
$102.55 (2.93%) $2.92

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.