Abbott acquires KOS- Implications for the diabetes sector
This morning Abbott (NYSE:ABT) said it will acquire Kos Pharmaceuticals (NASDAQ:KOSP) for $3.7 billion. After closing on Friday at $50.09, Abbott’s offer of $78 per share represents a hefty 56% premium for Kos shareholders. While the Street is looking at this deal as Abbott’s move into the lucrative cholesterol market, the deal also has implications for the diabetes sector as well.
Kos is one of the many companies with an inhaled insulin product in its pipeline. As everyone knows Diabetic Investor is not optimistic over this category. It will be interesting to see what Abbott does with this product. With their acquisition of Therasense and aggressive pricing Abbott has moved firmly into the number three spot in the blood glucose monitoring (BGM) market. The company is awaiting approval for their Navigator continuous glucose monitoring system and also has received approval for their Aviator insulin pump. Needless to say Abbott has a strong diabetes presence and the Kos inhaled insulin product fits nicely into the franchise. However, given the dismal outlook for the inhaled insulin category its doubtful Abbott would have any better chance at success.
This deal leaves MannKind (NASDAQ:MNKD) as the sole independent player in the inhaled insulin category. As Diabetic Investor reported last week the outlook for MannKind is problematic. It’s doubtful the company will be able to bring their Technosphere® inhaled insulin to market without finding a partner. Now that Abbott is acquiring Kos, this takes a possible partner out of the running. Sanofi-Aventis (NYSE:SNY) once a partner with Pfizer (NYSE:PFE) on Exubera, is unlikely to re-enter this market. Lilly (NYSE:LLY) and Novo Nordisk (NYSE:NVO) also have their own inhaled insulin projects. Becton Dickinson (NYSE:BDX) did indicate last week they would like to explore more opportunities in the insulin delivery market yet Diabetic Investor believes their efforts will be directed more towards the insulin pump area. With the future of the entire category cloudy and the number of potential partners dwindling Mannkind’s future is equally cloudy.
One company that could benefit from this deal is Amylin (NASDAQ:AMLN). Diabetic Investor has long considered Amylin to be the most valuable property in the diabetes sector. With so many major drugs facing generic competition in the next few years and major pharmaceutical companies seeking replacement products Amylin is becoming even more attractive. Byetta, the company’s top product continues to gain share and the long-acting version of Byetta expected to hit the market in late 2008 or early 2009 will be a paradigm shifting drug. The company also has a solid pipeline of new products. Given the epidemic growth rate of diabetes and obesity Amylin is sitting firmly in the catbirds seat.