Bristol-Myers to Buy Diabetes Maker Amylin for $5.3 Billion

Bristol-Myers (BMY) Squibb Co., which failed to get U.S. approval for a new diabetes treatment in January, will pay $5.3 billion for Amylin Pharmaceuticals Inc. (AMLN), the maker of two drugs on the market for the disease.

The purchase comes a month after Bristol’s top seller, the blood-thinner Plavix with $7.1 billion in sales last year, began facing generic competition. In 2013, the New York-based company loses patent protection on its $1.6 billion HIV drug, Sustiva.

Under the agreement announced yesterday, Bristol-Myers will pay $31 a share in cash, a 10 percent premium to the June 29 closing price for San Diego-based Amylin. At the same time, AstraZeneca Plc (AZN), based in London, will pay Bristol $3.4 billion to help develop Amylin’s drug portfolio, the companies said.

It “looks a bit rich in terms of the price paid and it’s a trend in the sector, where biotech companies are commanding significant premiums, higher than they would have commanded in previous years because the pharmaceutical sector is being forced down this road,” said Navid Malik, an analyst with Cenkos Securities Plc (CNKS) in London.

The pharmaceutical industry lost patent protection on products valued at $34 billion in annual sales last year, and revenue at risk from generics will rise to $147 billion by 2015, according to data compiled by Bloomberg.

The diabetes market has become a key target for drugmakers as a result of rising obesity rates and the aging of the Baby Boom generation. About 346 million people globally have diabetes, and the number of deaths from the chronic disease may double from 2005 to 2030, according to the World Health Organization.
Other Offers

AstraZeneca, Paris-based Sanofi (SAN) and Merck & Co. (MRK), of Whitehouse Station, New Jersey, also made offers during a bidding process, people with knowledge of the process had said.

Amylin ended a marketing deal with Indianapolis-based Eli Lilly & Co. in November, and has been seeking a partner to sell Bydureon, a version of its diabetes drug Byetta, outside the U.S. The San Diego-based company began to seek acquisition suitors after rejecting a $22-a-share offer from Bristol in February, people familiar with the matter said earlier this year.

Revenue at Amylin surpassed $650 million last year and may rise about 5 percent in 2012, according to analysts’ estimates compiled by Bloomberg. The company may generate as much as $1.5 billion in annual sales from Byetta and Bydureon, Phil Nadeau, a Cowen & Co. analyst in New York, wrote earlier this year.

For Bristol, the purchase is the largest of 19 since 2007, when it began so-called string of pearls acquisition strategy designed to revitalize the company in the face of patent losses and produce a more diverse stable of products.
Forxiga

Bristol-Myers’s own experimental diabetes product, dapagliflozin, also called Forxiga, failed to win U.S. marketing approval in January, when the Food and Drug Administration asked for more data to assess risks and benefits for the treatment, being developed with AstraZeneca. It’s awaiting approval in Europe, and may be cleared later in the U.S.

The boards of Bristol-Myers and Amylin endorsed the deal, according to yesterday’s statement. Including Amylin’s debt and a payment owed to Eli Lilly & Co. (LLY) of about $1.7 billion, the deal is valued at about $7 billion.

“We are pleased to be able to strengthen the portfolio we have built to help patients with diabetes by building on the success Amylin has had with its GLP-1 franchise,” Bristol-Myers Chief Executive Officer Lamberto Andreotti said in the statement.

Bristol-Myers and AstraZeneca will equally share profits and losses in the venture to develop Amylin’s drug portfolio.
Diabetes Alliance

“There will be an expansion of a diabetes alliance we have had with AstraZeneca,” Jennifer Fron Mauer, a spokeswoman for Bristol, said in a telephone interview. “We’ve had that since 2007 to co-develop and co-commercialize two Type II diabetes medicines in our pipeline.”

AstraZeneca, whose CEO David Brennan retired June 1, was thought to make most sense as a potential acquirer of Amylin, according to Michael King, an analyst at Rodman & Renshaw in New York. The company’s Seroquel medicine lost patent protection in March, and analysts expect the antipsychotic drug’s sales to drop to $3.27 billion this year from $5.82 billion last year, according to data compiled by Bloomberg.

Carl Icahn, the billionaire investor who is Amylin’s third- largest shareholder with a stake of almost 9 percent as of April 4, threatened a proxy fight in April and urged a sale, calling the company’s board “dysfunctional” and “not operating in a manner that enhances shareholder value.”

Amylin rose less than 1 percent to $28.20 in New York trading on June 29. The San Diego-based company’s shares were at $15.88 on March 26, the day before it was reported Bristol-Myers had made an unsolicited offer of $22 a share. Bristol-Myers gained 2.5 percent on June 29 to close at $35.95.

Amylin was advised by Goldman Sachs & Co. and Credit Suisse Securities LLC. Citigroup Inc. and Evercore Partners Inc. (EVR) are serving as financial advisers to Bristol Myers. Bank of America Merrill Lynch advised AstraZeneca.

From Bloomberg

Hiring Probably Cooled in Second Quarter: U.S. Economy Preview

The jobs tally in June probably crowned the weakest quarter for employment in more than two years, evidence the U.S. recovery has lost momentum, economists said before reports this week.

Employers increased payrolls by 90,000 workers last month after a 69,000 gain in May, according to the median forecast of 59 economists surveyed by Bloomberg News ahead of Labor Department figures due July 6. Excluding government agencies, private hiring may have climbed by 100,000, concluding the smallest quarterly advance since the first three months of 2010.

The job slump has shaken confidence and stalled household spending, which accounts for about 70 percent of the economy, making the expansion more susceptible to any fallout from the European debt crisis. Slowing consumer and global demand is also leading to a cooling in manufacturing, a mainstay of the recovery, another report this week may show.

“We really need to see job creation pick up, which is the only thing that’s going to get households spending on a sustained basis,” said Paul Dales, a senior U.S. economist at Capital Economics Ltd. in London. “The economy isn’t going to get exceptionally weak from here, but neither is it going to get much stronger.”

The unemployment rate, derived from a separate Labor Department survey of households, probably held at 8.2 percent, the economists predicted. Joblessness has exceeded 8 percent since February 2009, the longest stretch in monthly records dating to 1948.
Slower Growth

The expansion has lost luster. Gross domestic product rose at a 1.9 percent annual rate in the first quarter following a 3 percent rate in the prior three months, Commerce Department data showed last week. While household spending underpinned last quarter’s gain, incomes stretched by weak job creation will probably limit growth prospects.

Stronger economic growth and diminished joblessness would bolster President Barack Obama’s re-election prospects as November draws nearer. Obama attributed the weakness in job growth in May primarily to European governments’ inadequate response to the continent’s debt crisis, saying “our biggest challenge is not here in the U.S. but the economy overseas.” Republican candidate Mitt Romney said Obama “is always quick to find someone to blame” for the struggling economy.

Stocks surged on June 29, capping the biggest June gain since 1999, after European leaders reached an agreement that alleviated concern banks will fail. The Standard & Poor’s 500 Index climbed 4 percent last month.
Manufacturing Cools

Manufacturing may also offer less support to the economy as domestic and global demand fades. The Institute for Supply Management Inc.’s factory index fell to 52 in June, the lowest level in eight months, from 53.5 the prior month, according to the Bloomberg survey median ahead of a report tomorrow. A reading greater than 50 signals expansion.

The purchasing managers group’s services index, which covers almost 90 percent of the economy, fell to 53 last month from 53.7 in May, a report on July 5 may show according to economists surveyed.

To spur a faster expansion and lower unemployment, Federal Reserve policy makers announced on June 20 they would buy securities to extend the maturities of assets on the bank’s balance sheet, thereby lowering longer-term interest rates.

They also lifted forecasts for joblessness, anticipating the unemployment rate will average 8 percent to 8.2 percent in the fourth quarter of this year versus an April estimate of 7.8 percent to 8 percent.

“There is a lot of uncertainty in almost all markets today caused by low growth rates and high unemployment in the U.S. and slower or no growth globally,” Joseph Pyne, chairman and chief executive officer of Kirby Corp. (KEX), said during a June 25 call with analysts. Shares have slumped 7.9 percent since the shipping company cuts its earnings forecast that week.

                     Bloomberg Survey
==============================================================
                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
==============================================================
ISM Manu Index            7/2       June      53.5      52.0
Construct Spending MOM%   7/2       May       0.3%      0.2%
Vehicle Sales Mlns        7/3       June      13.7      13.9
Domestic Vehicles Mlns    7/3       June      10.8      10.9
Initial Claims ,000’s     7/5      30-Jun     386       385
ISM NonManu Index         7/5       June      53.7      53.0
Nonfarm Payrolls ,000’s   7/6       June       69        90
Private Payrolls ,000’s   7/6       June       82       100
Manu Payrolls ,000’s      7/6       June       12        8
Unemploy Rate %           7/6       June      8.2%      8.2%
Hourly Earnings MOM%      7/6       June      0.1%      0.2%
Hourly Earnings YOY%      7/6       June      1.7%      1.7%
Avg Weekly Hours          7/6       June      34.4      34.4
=============================================================

U.S. Stocks Rally to Give Dow Best Month Since October

U.S. stocks rallied for the week, lifting the Dow Jones Industrial Average to the best monthly gain since October, amid optimism an agreement by European leaders on banks will help contain the region’s debt crisis.

All 10 industry groups in the Standard & Poor’s 500 Index rose. Energy companies jumped the most, climbing 4.8 percent, as oil rebounded. A gauge of homebuilders rallied 13 percent as housing data beat forecasts and Lennar Corp.’s profit surged. Hospital companies including Tenet (THC) Healthcare Corp. jumped after the Supreme Court upheld the core of President Barack Obama’s industry overhaul. Nike Inc. (NKE) sank 12 percent while Research In Motion Ltd. (RIM) plunged 25 percent amid disappointing earnings.


The S&P 500 advanced 2 percent to 1,362.16 during the week, extending its increase in June to 4 percent, the most since February. The Dow gained 239.31 points, or 1.9 percent, to 12,880.09 for the week, finishing the month up 3.9 percent.

“It looks like Europe is moving toward a resolution of keeping the euro together,” George Young, a partner at St. Denis J. Villere & Co. in New Orleans, said in a telephone interview. His firm oversees about $1.6 billion. “We are putting money into stocks. We believe that the U.S. is going to do well longer term.”

Global stocks rallied on the last day of the week, with the S&P 500 surging 2.5 percent for its biggest advance of the year, as euro-area leaders agreed to relax conditions on emergency loans for Spanish banks and possible help for Italy. In the U.S., economic reports during the week showed home sales and orders for durable goods rebounded while consumer spending stalled and confidence among Americans declined to the lowest level this year.
Worst Quarter

Concern that Spanish banks may fail and Greece would leave the 17-nation euro zone drove the S&P 500 down as much as 9.9 percent from this year’s high in April. Even after this month’s rebound, the benchmark gauge lost 3.3 percent since the end of March, the worst quarter since the three months ended September. The Dow slumped 2.5 percent for the quarter.

The S&P 500 Energy Index jumped 4.8 percent, the biggest weekly increase since December, as oil soared the most in more than three years on June 29. The gain in crude may accelerate after the European Union’s ban on the purchase, transport, financing and insurance of Iranian crude starts on July 1, a Bloomberg survey showed. Chevron Corp., the second-largest U.S. energy producer, advanced 5 percent to $105.50. Bigger rival Exxon Mobil Corp. rose 4.2 percent to $85.57.
Homebuilders Rally

An S&P gauge of homebuilders rallied 13 percent to the highest level since 2008 as reports showed sales of new homes increased to a two-year high and housing prices dropped at the slowest pace in more than a year. Lennar (LEN) climbed 17 percent to $30.91 after a tax benefit and improving demand fueled a surge in its fiscal second-quarter profit. KB Home (KBH) soared 20 percent to $9.80 after reporting a narrower quarterly loss.

Tenet, the third-biggest U.S. hospital chain, climbed 7.2 percent to $5.24. The Supreme Court, voting 5-4, largely left intact the Affordable Care Act’s transformation of the health system, saying Congress has the power to make Americans get insurance or pay a penalty. They also let stand a plan to expand Medicaid by about 16 million people, though the justices limited the power to punish states that don’t comply. The new regulations may arrest a rising tide of uninsured patients unable to pay their medical bills.

Commercial carriers fell in the face of the law’s new regulations. WellPoint Inc. (WLP), the second-largest U.S. health insurer, dropped 8.6 percent to $63.79.
Financial Shares

Optimism over Europe’s efforts to tame the debt crisis helped buoy financial shares, pushing the S&P 500 index (SPX) of banks, brokerages and insurers up 2.2 percent. Bank of America Corp. (BAC) increased 3 percent to $8.18 while Morgan Stanley rose 3.2 percent to $14.59.

Genworth Financial Inc. (GNW), the life insurer and mortgage guarantor, surged 9.5 percent to $5.66 as hedge fund Highfields Capital Management LP said it is in talks with management about increasing the value of its stake.

JPMorgan Chase & Co. (JPM) fell 0.7 percent to $35.73. The lender’s losses from credit derivatives may eventually total as much as $9 billion, exceeding the firm’s initial estimate, the New York Times reported.

Constellation Brands Inc. (STZ) had the biggest gain in the S&P 500, soaring 40 percent to $27.06. The company agreed to buy the other half of its Crown Imports joint venture with Grupo Modelo SAB for about $1.85 billion, becoming the sole U.S. importer of top-selling Corona beer.

News Corp. (NWSA)

News Corp. climbed 9.5 percent to $22.29. The company announced plans to split into two publicly traded entities focused on publishing and entertainment after shareholder pressure prompted the biggest reorganization since Rupert Murdoch built the media empire.

Europe’s debt crisis and a slowdown in global growth may have taken a toll on corporate earnings. Profits at S&P 500 companies are forecast to show a drop of 1.8 percent in the second quarter, according to analyst estimates compiled by Bloomberg.

Earnings pessimism reached levels last seen during the financial crisis. Ninety-four corporations issued profit projections that trailed analyst estimates during the 30 days through June 29, or 3.4 times the number of those that exceeded them. The ratio was the highest since March 2009, data compiled by Bloomberg show.

Research In Motion plunged 25 percent, the most since 2008, to $7.39 after posting a loss and delaying the next BlackBerry operating system. The smartphone maker also said it would cut 5,000 jobs.
Nike, Facebook

Nike, the world’s largest sporting-goods company, tumbled 12 percent to $87.78 after fourth-quarter profit unexpectedly declined for the first time since 2009, hurt by an increase in marketing and labor costs.

O’Reilly Automotive Inc. (ORLY) fell the most in the S&P 500, sinking 14 percent to $83.77. The retailer of auto parts, tools and accessories said sales growth was slower than expected and second-quarter profit will be on the lower end of the company’s forecast range.

Facebook Inc. (FB) slid 5.9 percent to $31.10 as analysts said the stock is worth no more than its debut price of $38. Analysts including those at lead underwriter Morgan Stanley (MS) have an average 12-month price estimate of $37.52 on the social-network operator, according to data compiled by Bloomberg. Facebook has lost 18 percent since its May initial public offering on concern the stock is overvalued and the company will struggle to attract users.

From Bloomberg

EU Banking Debate Shifts to Euro Area After Accord on Spain

The European Union’s push to unify bank oversight moved to the euro area after two days of talks in Brussels, putting the European Central Bank at the center of Spain’s efforts to extract its government from its banking- industry rescue.

Euro-area leaders asked for proposals this year to unify banking supervision and soup up the ECB’s powers. They referred to a clause in the EU treaty that allows them to give the ECB prudential oversight of banks and other non-insurance financial companies.

The move paves the way for the European Commission, the EU’s regulatory arm, to augment its proposals on deposit insurance, capital requirements and how to handle failing banks. It also acknowledges concerns from the U.K. and Sweden that countries outside the currency area be free from mandates to join the ECB umbrella.

Once Europe establishes a single banking supervisor, leaders said they may allow cash-strapped lenders to be recapitalized directly instead of through their home governments. This could break the link between banks and sovereigns that has plagued the euro area throughout the crisis and become a particular flash point for Spain’s bank rescue.

‘Held Hostage’

“The Spanish sovereign is effectively being held hostage to what is likely to be a tortuous political process in putting the ECB in charge of euro-zone banks,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London. He said direct recapitalization of Spanish banks is the summit’s most important achievement and hinges on creation of an independent supervisory authority.

French President Francois Hollande predicted that ECB supervision over euro-area banks wouldn’t be in place before year end. British Prime Minister David Cameron said “the euro- zone countries are well on the way to making the euro-zone bank, the ECB, the regulators of their banks. That will be a good outcome.”

ECB President Mario Draghi welcomed the summit’s overall conclusions and acknowledged the Brussels-based commission’s mandate to assess the ECB’s role as allowed in the treaty. Speaking to reporters today, he did not elaborate on how the commission’s proposals should take shape other than to say “all these things should be, to be credible, accompanied by strict conditionality.”
National Supervisors

The Frankfurt-based ECB might end up serving as an umbrella over national supervisors, rather than building a separate organization, EU officials said in the run-up to this week’s summit. EU members would need to decide how many banks to include and how the ECB would work with the European Banking Authority, which was created to help supervisors coordinate across the 27-nation bloc.

EU Financial Services Commissioner Michel Barnier called on all the bloc’s nations to broker deals on draft financial regulations in the coming weeks as a “cornerstone” of the banking union that EU leaders seek to secure the long-term future of the euro, in an interview in Brussels yesterday. He said decisions on whether the ECB or the London-based EBA gain enhanced powers depends on how all 27 nations agree to further pool their bank-oversight powers.

The EBA, which began work last year, was set up as part of the EU’s response to the crisis that followed the 2008 collapse of Lehman Brothers Holdings Inc. It coordinates the work of national regulators and has some power to resolve disputes between them.
Banking Union

Where to place enhanced supervisory power becomes a trickier decision if individual countries opt out of a banking union, Barnier said, in part because the ECB decides monetary policy for the 17 countries of the euro area, and in part because of other aspects of the EBA’s mandate. Should all 27 EU countries sign up for the banking union plans, then the enhanced power for the EU to supervise lenders should “probably” be handed to the EBA, Barnier said.

“If you are fewer than 27 then there is an issue to resolve with the EBA, if you are more than 17 then there is an issue to resolve with the ECB,” he said. “This is why there are a range of possible models, and why we need some weeks or months to work on this.”

The adoption of proposals that the commissioner has made on bank capital requirements, coordination of deposit guarantee programs and the winding-down of failing banks is a “precondition” for the creation of a banking union, Barnier said yesterday in an interview with Bloomberg News in Brussels. The draft laws should be settled “in the weeks to come, or in the case of crisis resolution before the end of the year.”

Depending on the outcome of the summit, the commission will present plans for extra EU supervision of banks, as well as for “the mutualization of deposit guarantee funds and resolution funds” by year end, Barnier said.

From Bloomberg

BOE Seen Adding to Stimulus as Europe Crisis Undermines Recovery

The Bank of England will probably expand its so-called quantitative easing program next week as the debt crisis in Europe impedes the U.K.’s return to growth.

The nine-member Monetary Policy Committee, led by Governor Mervyn King, will raise its target for bond purchases by 50 billion pounds ($78 billion) to 375 billion pounds, according to 30 of 41 economists in a Bloomberg news survey. Eight predict an increase to 400 billion pounds, and the rest see a smaller increase or no change.

King told reporters yesterday that Europe’s debt turmoil has stoked uncertainty and tightened credit availability, creating headwinds to Britain’s recovery from recession. Policy makers may find it easier to act next month than they did at their June 7 decision after inflation slowed to 2.8 percent, the closest to their 2 percent target since November 2009.

“Growth is weak and inflation has come down, so that adds to the case for doing more quantitative easing,” said George Buckley, an economist at Deutsche Bank AG in London. “This could be the end of it, provided things pick up as we expect, though that’s still an open question.”

Officials voted 5-4 to keep their bond-purchase target at 325 billion pounds at this month’s policy decision. That defeated a push by King, Adam Posen and David Miles for a 50 billion-pound expansion, and Markets Director Paul Fisher’s bid for 25 billion pounds.
Awaiting News

The majority preferred to wait to assess the outcome of June 17 elections in Greece, the European Council summit that concluded yesterday and the results of the bank’s June 22 Financial Policy Committee meeting.

With no one party able to claim victory in Greece, the leading New Democracy party has been able to form a coalition on pledges to keep the country in the common currency while fighting for looser aid conditions from the euro area and the International Monetary Fund.

Euro-area leaders agreed early yesterday to ease terms on loans to Spanish banks and paved the way to a direct recapitalization of banks. The agreement sparked the biggest gain in the euro this year.

King yesterday presented FPC recommendations that financial institutions should dip into liquid buffers, a week after the central bank completed the first round of a new auction to give banks access to more cash. The move addresses concerns expressed by some officials this month that lenders were bolstering reserves with funds from their bond sales to the Bank of England.

Forty-nine of 50 economists in a separate Bloomberg survey see no change next week in the benchmark rate from the record low of 0.5 percent. One economist, Tom Vosa at National Australia Bank, forecast a cut to 0.25 percent.

From bloomberg

Germany denies Schaeuble talk of Greece euro exit

(Reuters) - A deputy German Finance Minister dismissed a magazine report saying Finance Minister Wolfgang Schaeuble had told conservative members of parliament on Friday to prepare for a looming Greek bankruptcy and euro zone exit.

"This report is nonsense," Deputy Finance Minister Steffen Kampeter told Reuters on Saturday on the sidelines of a regional meeting of Christian Democrats in the western town of Krefeld.

Kampeter said that Schaeuble had spoken to the conservative MPs on Friday about the need for the austerity and reform measures in Greece to be implemented.

German newsweekly Focus reported that Schaeuble had told MPs in Chancellor Angela Merkel's Christian Democrats (CDU) and the sister party, Christian Social Union (CSU), to get ready for Greece leaving the euro zone and a Greek state bankruptcy.

The magazine said in an advance of a report in its Monday edition that Schaeuble was talking to the MPs about the further development of the European Stability Mechanism (ESM), the euro zone's permanent bailout fund. He said that an aspect that would be necessary was to have a set-up for state bankruptcies.

Focus said that participants of the meeting heard Schaeuble say that in the view of many experts Greece would not make it "without an external devaluation."


From Reuters.