In order to expand its presence in Brazil, biotech company Amgen (AMGN) entered into two deals recently. While one deal relates to the acquisition of a privately held Brazilian pharma company, the second deal relates to the reacquisition of rights to certain products.
Bergamo Acquisition
Amgen acquired privately held Brazilian pharma company, Bergamo, for $ 215 million. Bergamo, which has manufacturing facilities in Sao Paulo, is a leading supplier of medicines to hospitals in Brazil. Revenues, which have been growing 19% per annum since 2007, came in at $ 80 million in 2010. This acquisition should allow Amgen to expand its local presence in Brazil.
Hypermarcas Deal
In addition to acquiring Bergamo, Amgen also entered into an agreement with Hypermarcas for reacquiring rights to certain products. The products include Amgen’s Vectibix and Mimpara. Both drugs are already approved in Brazil.
Amgen intends to reacquire rights to a third product, romiplostim, which is yet to gain approval in Brazil. Romiplostim is currently under review in Brazil for idiopathic thrombocytopenic purpura, a clotting disorder.
Significant Potential in Brazil
The Brazilian market represents significant commercial potential. According to Amgen, Brazil is one of the top ten pharma markets in the world and has been growing at an annual rate of about 12%. Brazil is slated to be the world's fifth largest pharma market in the next 4 years.
With these two deals, Amgen is looking to gain direct and immediate access to the Brazilian market. We note that other companies like Pfizer (PFE) are also looking to strengthen their presence in Brazil.
Neutral on Amgen
We currently have a Neutral recommendation on Amgen. The company received a major boost in 2010 when it gained US approval for Prolia/Xgeva. The company has a lot riding on the successful commercialization of Prolia/Xgeva. We are bullish on Prolia/Xgeva, but any hiccup, either with respect to delays in gaining approval for additional indications, a miss in any of the ongoing phase III programs, delays in the reimbursement coverage process or safety concerns post-launch, will weigh heavily on the shares.
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