Summary
Amgen Inc. (AMGN) has filed an 8-K report on January 9, 2017, to announce a significant update to its supply agreement with DaVita Inc. The company has entered into a new six-year Sourcing and Supply Agreement, effective January 6, 2017, through December 31, 2022. This new agreement will govern the supply of Amgen's key erythropoiesis stimulating agents, EPOGEN® (Epoetin alfa) and Aranesp® (darbepoetin alfa), to DaVita for use in dialysis services in the United States and Puerto Rico. The new agreement replaces a prior agreement that would have expired in December 2018 and ensures that Amgen USA will supply at least 90% of DaVita's annual requirements for these products throughout the term. The agreement also includes provisions for a potential wind-down purchase period in 2023. Investors should note that the new agreement incorporates discount pricing and rebates, some of which are conditional on future pricing levels. This move solidifies a long-term relationship with a major customer in the dialysis sector and provides a predictable revenue stream for Amgen's EPOGEN and Aranesp franchises.
Key Highlights
- 1Amgen USA entered into a new six-year Sourcing and Supply Agreement with DaVita Inc., effective January 6, 2017, through December 31, 2022.
- 2The agreement mandates Amgen USA to supply at least 90% of DaVita's annual requirements for EPOGEN® (Epoetin alfa) and Aranesp® (darbepoetin alfa) in the US and Puerto Rico for dialysis services.
- 3The new agreement replaces a prior agreement which was set to expire on December 31, 2018.
- 4DaVita has the option to purchase EPOGEN and Aranesp during 2023 under a wind-down provision.
- 5The new agreement includes provisions for discount pricing and rebates for EPOGEN and Aranesp.
- 6Some rebates are contingent upon future pricing levels of the supplied products.
- 7The agreement can be terminated by either party in case of specific breaches by the other.