Post by icemandios on May 16, 2023 17:32:53 GMT
FTC sues to block $28B Amgen-Horizon deal, in move that will send shockwaves through biopharma M&A
The FTC on Tuesday filed a lawsuit to block Amgen’s proposed $28 billion buyout of Horizon Therapeutics, a move that Wall Street analysts have warned could dull M&A enthusiasm across the sector.
The agency argued that the merger would allow Amgen to use rebates on its existing drugs to “pressure insurance companies and pharmacy benefit managers into favoring” Horizon’s thyroid eye disease and chronic refractory gout products: Tepezza and Krystexxa, respectively.
“The value of the rebates that Amgen can offer on its high-volume drugs as part of its cross-market bundles may make it difficult, if not impossible, for smaller rivals who are developing drugs to compete against Tepezza and Krystexxa to match the level of rebates that Amgen would be able to offer,” the agency said in a news release.
As some analysts have pointed out, the FTC has made reviewing Big Pharma mergers a key priority, and Sen. Elizabeth Warren (D-MA) urged the agency earlier this year to scrutinize the deal due to “records of anti-competitive business practices” and price increases.
“These corporate deals are bad for patients: prices for drugs sold by acquired companies increase at a faster rate than those sold by their non-acquired counterparts,” Warren said in a letter in January.
Amgen announced plans to buy Horizon late last year. Sanofi and Johnson & Johnson also reportedly expressed interest in acquiring the company. Tepezza achieved $405.3 million in net sales in the first quarter of this year, while Krystexxa brought in $187.0 million. The deal, which has been expected to close in the first half of this year, was the largest pharma acquisition announced in 2022, according to the FTC.
As M&A picks up this year, with biopharma companies tallying $64 billion in deals as of last month, analysts warn the FTC’s suit could tamp down enthusiasm.
“Today’s action — the FTC’s first challenge to a pharmaceutical merger in recent memory — sends a clear signal to the market: The FTC won’t hesitate to challenge mergers that enable pharmaceutical conglomerates to entrench their monopolies at the expense of consumers and fair competition,” FTC Bureau of Competition director Holly Vedova said in the news release.
Capitol Forum first reported on the expected suit; others including Bloomberg and Reuters later cited people familiar with the matter.
A lawsuit could indicate new thinking at the FTC about what constitutes an anticompetitive business combination. Whereas the agency usually takes action when a merger brings drugs that would otherwise be rivals — drugs that hit the same targets or treat the same diseases in similar ways — to the same company, Amgen and Horizon don’t share much in terms of therapeutic focus. And even then, the FTC usually requires the buyer to divest one of the offending programs rather than blocking the whole deal.
“On a broader note, the FTC filing a lawsuit to block this deal will dampen M&A enthusiasm across the biotech sector, particularly given the lack of direct portfolio overlap between Amgen and Horizon,” William Blair analyst Matt Phipps wrote in a note, adding the Horizon takeover is the second largest among 11 acquisitions of public biotech companies announced this year, just under Pfizer’s $43 billion Seagen deal.
He wrote that Amgen will likely fight the FTC in court, but if it doesn’t or if the deal falls through, the big player would be obligated to pay Horizon $974.4 million in a reverse termination payment.
Jefferies’ Akash Tewari opined that a lawsuit against Amgen-Horizon “would be one of the weakest recent cases we’ve seen in recent memory” from the FTC.
The FTC on Tuesday filed a lawsuit to block Amgen’s proposed $28 billion buyout of Horizon Therapeutics, a move that Wall Street analysts have warned could dull M&A enthusiasm across the sector.
The agency argued that the merger would allow Amgen to use rebates on its existing drugs to “pressure insurance companies and pharmacy benefit managers into favoring” Horizon’s thyroid eye disease and chronic refractory gout products: Tepezza and Krystexxa, respectively.
“The value of the rebates that Amgen can offer on its high-volume drugs as part of its cross-market bundles may make it difficult, if not impossible, for smaller rivals who are developing drugs to compete against Tepezza and Krystexxa to match the level of rebates that Amgen would be able to offer,” the agency said in a news release.
As some analysts have pointed out, the FTC has made reviewing Big Pharma mergers a key priority, and Sen. Elizabeth Warren (D-MA) urged the agency earlier this year to scrutinize the deal due to “records of anti-competitive business practices” and price increases.
“These corporate deals are bad for patients: prices for drugs sold by acquired companies increase at a faster rate than those sold by their non-acquired counterparts,” Warren said in a letter in January.
Amgen announced plans to buy Horizon late last year. Sanofi and Johnson & Johnson also reportedly expressed interest in acquiring the company. Tepezza achieved $405.3 million in net sales in the first quarter of this year, while Krystexxa brought in $187.0 million. The deal, which has been expected to close in the first half of this year, was the largest pharma acquisition announced in 2022, according to the FTC.
As M&A picks up this year, with biopharma companies tallying $64 billion in deals as of last month, analysts warn the FTC’s suit could tamp down enthusiasm.
“Today’s action — the FTC’s first challenge to a pharmaceutical merger in recent memory — sends a clear signal to the market: The FTC won’t hesitate to challenge mergers that enable pharmaceutical conglomerates to entrench their monopolies at the expense of consumers and fair competition,” FTC Bureau of Competition director Holly Vedova said in the news release.
Capitol Forum first reported on the expected suit; others including Bloomberg and Reuters later cited people familiar with the matter.
A lawsuit could indicate new thinking at the FTC about what constitutes an anticompetitive business combination. Whereas the agency usually takes action when a merger brings drugs that would otherwise be rivals — drugs that hit the same targets or treat the same diseases in similar ways — to the same company, Amgen and Horizon don’t share much in terms of therapeutic focus. And even then, the FTC usually requires the buyer to divest one of the offending programs rather than blocking the whole deal.
“On a broader note, the FTC filing a lawsuit to block this deal will dampen M&A enthusiasm across the biotech sector, particularly given the lack of direct portfolio overlap between Amgen and Horizon,” William Blair analyst Matt Phipps wrote in a note, adding the Horizon takeover is the second largest among 11 acquisitions of public biotech companies announced this year, just under Pfizer’s $43 billion Seagen deal.
He wrote that Amgen will likely fight the FTC in court, but if it doesn’t or if the deal falls through, the big player would be obligated to pay Horizon $974.4 million in a reverse termination payment.
Jefferies’ Akash Tewari opined that a lawsuit against Amgen-Horizon “would be one of the weakest recent cases we’ve seen in recent memory” from the FTC.
