Amgen in joint venture for heart drug: Cytokinetics deal lowers financial risk.

The Thousand Oaks drug maker Amgen Inc. kicked off 2007 by inking a $76-million agreement with South San Francisco-based Cytokinetics Inc. to collaborate on an experimental heart failure drug.

The alliance, which marks Amgen's first foray into a drug specifically designed for cardiac therapy, will initially last two years and has Amgen buying more than 3.48 million shares of Cytokinetics stock--about 7 percent of the company--for $33 million, or $9.47 a diluted share. Amgen will also shell out an upfront payment of $42 million.

Amgen, the world's largest biotechnology company, also has the option to pay as much as $700 million for rights to commercialize the drug, which activates a protein that helps weak heart muscles to contract and move blood.

The product developed by Cytokinetics, called CK-1827452, is currently in the second of three early clinical trials.

As part of the alliance, Cytokinetics will research the drug for two years. If certain mileposts are met in mid-stage trials set to begin this year, Amgen will have the option to conduct the trials for a $50 million payment, the companies said.

In addition to royalties, Cytokinetics could earn up to $600 million in milestone payments for creating the drug and other products, the companies said.

The companies have few competitors in this area, and the drug's development could prove a boon to both.

Amgen currently does not have any drugs on the market for cardiac disease, although its anemia drug, Aranesp, is in trials as a treatment for heart failure. The company has also developed another anemia treatment, called Epogen, and the rheumatoid arthritis therapy Enbrel. The Food and Drug Administration this fall approved its Vectibix colorectal cancer treatment, sending its market capitalization skyrocketing for 2006, finishing at nearly $80 billion.

Shiv Kapoor, a biotechnology and specialty-pharma analyst in the Equity Capital Markets group at Montgomery & Co., said the Cytokinetics agreement is a way for Amgen to diversify into cardiac therapies without overextending itself.

"They have desired an interest to be in areas that are significant need areas. And this is one of them," he said. "It's not a lot of money for Amgen. They're keeping an option."

Les Funtleyder, an analyst with Miller Tabak & Co., said the move also minimizes the danger for Amgen in case CK-1827452 cannot go to market.

"It's risk management; rather than acquiring the whole company," he said. "A lot of drugs fail. This takes a lot of the risk out and they still get the drug. It's a move to build out their pipeline."

Staffing Company Expands Portfolio, Again

On Assignment, a Calabasas staffing company once devoted only to health care, is expanding into information technology.

The company has moved to acquire Massachusetts-based Oxford Global Resources, which provides engineering and tech staffing services, for $190 million in cash and $10 million in common stock. Oxford shareholders will also have the chance to receive an earn-out of up to $12 million based on the company's performance over the next two years.

Oxford is expected to report 2006 revenues of $177 million, a 20 percent increase from 2005. Gross margins over the last three years have been in excess of 34 percent.

The company has a pool of 25,000 candidates and 850 professionals on assignment.

On Assignment this month also finalized the sale of Salt Lake City-based VISTA Staffing Solutions. With the acquisitions of Oxford and VISTA, the company expects to have pro forma revenues in excess of $520 million for 2006, the company said.

"The acquisition is a significant fit with On Assignment's growth strategy of operating in strong niche staffing practices with durable business models that are characterized by high bill rates, high and sustainable gross margins and low customer concentration," said On Assignment President and CEO Peter Dameris.

Staff Reporter Chris Coates can be reached at [phone] or at [e-mail].