ZymoGenetics gets bought out

Investors holding shares of ZymoGenetics, Inc. (NASDAQ:ZGEN)  today are going to be eating cavier and popping some champagne tonight, as ZGEN got a huge premium to their closing price in the buyout.  This morning Zymo shares are up 84% and going higher.

Here is the news -- Bristol-Myers Squibb Co. said Tuesday it will acquire biotechnology partner ZymoGenetics Inc. for $885 million in another move by a major drugmaker to boost its pipeline by snapping up a smaller developer.

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The New York drugmaker's $9.75-per-share bid represents a 77 percent premium to Zymogenetics' closing price of $5.51. Bristol-Myers' said the deal is worth $735 million excluding ZymoGenetics' cash on hand. Both companies have approved the deal and the board of ZymoGenetics is recommending that shareholders support the bid.

ZymoGenetics stock jumped $4.50, or nearly 85 percent, to $9.76 in aftermarket trading.

Seattle-based ZymoGenetics makes Recothrom, a drug used to reduce bleeding during surgeries. Since January 2009 it has been working with Bristol-Myers to develop a potential hepatitis C treatment called pegylated interferon lambda. That drug is in midstage clinical testing, and the companies said it "could be an important contributor to Bristol-Myers Squibb's future growth" if it is approved.

ZymoGenetics is also testing experimental treatments for cancer and inflammatory disorders including atopic dermatitis.

"The acquisition of ZymoGenetics brings us full ownership of a promising investigational biologic that strengthens our very diversified Hepatitis C portfolio," said Lamberto Andreotti, CEO of Bristol-Myers Squibb.

Bristol-Myers is one of the world's largest drugmakers and sells Plavix, a blood thinner that is the world's second-best selling brand name drug. Its other products include the psychiatric disorder treatment Abilify, Reyataz and Sustiva for HIV, Sprycel for cancer, and Onglyza for diabetes.

However the company is looking for ways to shore up its growth in the coming years. The patents supporting Plavix will expire in 2012, allowing cheaper generic versions to enter the market and eroding sales. Bristol-Myers' blood pressure drug Avapro is likely to face generic competition the same year.

Sales of Plavix totaled $6.15 billion in 2009, and the company reported $1.28 billion in Avapro revenue.

The move comes as many big pharma companies face patent cliffs that have them racing to fill out their development pipelines through acquisitions. Biotechnology companies are particularly attractive because there is not yet a regulatory pathway for generic versions of biotech drugs. Last month Sanofi-Aventis took its $18.5 billion bid for Genzyme Corp. public after that biotech company rejected the offer as inadequate.

Shareholders holding 37 percent of Zymogenetics' stock have agreed to vote for the deal. Bristol-Myers said the acquisition will trim its profit by 3 cents per share in 2010 and by 7 cents per share in 2011.