Glaxo and Amgen Terminate Agreement - Analyst Blog

In an 8K filing, Amgen Inc. AMGN announced the termination of its agreement with GlaxoSmithKline GSK related to the commercialization of Prolia (denosumab) for osteoporosis in certain countries. Investors reacted negatively to the news with both Amgen and Glaxo shares falling 1.47% and 0.53%, respectively.

Original Agreement

As per the original agreement, entered in Jul 2009, both Glaxo and Amgen agreed to share the commercialization responsibility of denosumab for the postmenopausal osteoporosis PMO indication in Europe, Australia, New Zealand and Mexico. Amgen retained rights to the drug (for both PMO and oncology) in the U.S. and Canada and for all oncology indications in Europe and certain other countries.

In some countries like China, Brazil, India and South Korea, where Amgen did not have a commercial presence, Glaxo gained the right to market the drug for all indications.

Terms of Deal Termination

As per the terms of the termination agreement, Glaxo will be relieved of all commercial activities in all the countries covered by it under the 2009 agreement, except for Australia, by the end of this year. Amgen will regain rights to Prolia in these countries. In exchange, Amgen will make an initial payment and specific milestone payments of $275 million over the transition period. Additionally, Amgen will reimburse costs of up to $15 million incurred by Glaxo during this transition period.

However, we note that the termination agreement excludes the agreement related to the commercialization of denosumab for all indications in certain countries.

While Glaxo carries a Zacks Rank #4 (Sell), Amgen sports a Zacks Rank #1 (Strong Buy). Investors may also consider other Zacks Rank #1 stocks like Alexion Pharmaceuticals, Inc. ALXN and Alkermes ALKS.