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Amgen to Take Stake in Cancer Drug Developer

Tularik's technology identifies genes that cause disease. The two firms will work together to develop treatments.

May 22, 2003|Denise Gellene | Times Staff Writer

Biotech giant Amgen Inc. said Wednesday that it planned to buy more than 20% of tiny drug maker Tularik Inc. as part of an agreement to jointly develop cancer treatments.

Tularik shares soared $2.05 to $8.39, while Amgen slipped 33 cents to $60.70, both on Nasdaq.

South San Francisco-based Tularik would receive $125 million in funding from Amgen under the collaboration deal, which requires approval of Tularik shareholders. The two companies would work together to develop cancer drugs over five years.

Tularik Chief Executive David Goeddel called the deal "a broad affirmation of our entire company."

The company, founded in 1991, has a technology to identify genes that play a role in cancer and such chronic diseases as asthma, psoriasis and multiple sclerosis. Tularik uses that information to try to develop pills that control the activity of the disease-causing genes.

Although Tularik has no drugs on the market, it has a pill for treatment of liver cancer that is in the final phase of testing on humans. It also has a second cancer pill in the early stages of human testing. Neither treatment is part of the Amgen deal.

Tularik's losses nearly doubled last year to $93.8 million from $48.5 million in 2001.

Much of Amgen's technical expertise lies in developing injectable biotech drugs that are produced in live cells, such as bacteria or hamster cells. But Amgen has been branching into oral medications and recently disclosed it was working on a pill for rheumatoid arthritis.

Thousand Oaks-based Amgen said the deal would broaden its opportunities in developing pills to treat cancer.

Amgen would provide Tularik with $50 million in research funding, milestone payments and royalties on sales of drugs that result from the partnership. Goeddel said Tularik had identified about 30 genes that play a role in cancer and more than half of them are good targets for drugs.

Over the next three years, Amgen would buy $35 million of newly issued Tularik stock at $10 a share and would buy an additional $40 million of newly issued stock at market prices. Goeddel said the deal would provide Tularik with two years' worth of cash.

In a separate transaction, Amgen will buy 11% of Tularik from ZBK Pharma Vision of Switzerland for $45 million, or $7.50 a share. Amgen plans to purchase an additional 5% stake from ZBK for $22.5 million, or $7.50 a share, after it receives regulatory clearance.

Analyst Fariba Ghodsian of Castle Creek Life Sciences Partners in Beverly Hills noted that most of Amgen's upfront investment in Tularik would go to ZBK and not Tularik itself. "Of course it is always good to have Amgen as a partner," she said. "But I am not excited about the deal."

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