ZymoGenetics Soars 84% on Bristol-Myers Takeover

Posted by on Sep 08, 2010 | No comment

Bristol-Myers Squibb Co (NYSE: BMY) has plans to acquire biotech drug developer ZymoGenetics Inc. (NASDAQ: ZGEN) in a deal valued at roughly $885 million. This price puts a value of $9.75 per share on ZymoGenetics stock, which represents a premium of about 84% to Tuesday’s closing share price of $5.30. The total cost of $885 million also includes about $150 million in cash held by ZymoGenetics.

Shares of ZymoGenetics were halted after the market closed Tuesday to prevent price gouging. The boards of both companies have unanimously approved the transaction, and shareholders owning about 37% of ZymoGenetics have agreed to support it; however , they need a majority vote to pass the proposal.

In addition to pegylated-interferon lambda for hepatitis C, which ZymoGenetics and Bristol Myers already have a collaboration deal for, the latest acquisition adds Recothrom, a synthetic blood-clotting enzyme, to Bristol Myers’ drug portfolio. The experimental drug pegylated-interferon has the potential to effectively treat patients who do not respond well to traditional interferon.

Bristol Myers said it expects the transaction to reduce its earnings per share by 3 cents this year and by 7 cents in 2011 before profits from the acquisition will begin to make relevant positive differences in earnings. Bristol Myers will also take control of ZymoGenetics’ other development programs including interleukin-21 protein, which is being tested as a treatment for advanced melanoma, and six earlier-stage biologic drug candidates.

Bristol Myers shares rose sharply this morning as investors heard of the ZymoGenetics acquisition then fell back to slightly above its opening levels as investors learned more about the costs to Bristol Myers and the time line for profiting from the transaction. Bristol Myers share hit a high of $26.96 during the day before retreating to close at $26.75 an overall gain of $0.14 from its previous close of $26.61.

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