US FTC sues to block Amgen's $27.8 bln deal for Horizon Therapeutics (updated)

Horizon Therapeutics

16/05/2023 20:33

(Adds quote from former FTC commissioner in paragraph 6,
analyst comment in paragraph 12)
    By Diane Bartz and Leroy  Leo
       WASHINGTON, May 16 (Reuters) - The U.S. Federal Trade
Commission said on Tuesday it has filed a lawsuit to stop Amgen
Inc's  AMGN.O  $27.8 billion acquisition of Horizon Therapeutics
Plc  HZNP.O  in a rare move to block a large pharmaceutical
deal.
    In its complaint, the FTC said Amgen would be able to
leverage the powerful position it has with insurance companies
and pharmacy benefit managers who want access to its blockbuster
drugs to pressure them into favorable terms for Horizon's two
key products - the fast-growing thyroid eye disease treatment
Tepezza and gout drug Krystexxa.
    The FTC's argument against the deal is broader than concerns
raised with other recent pharmaceutical deals. In those cases,
the regulator flagged therapeutic overlaps in the companies and
waved the deals through after requiring one of the medicines to
be divested.
    Amgen said in a statement it was disappointed by the FTC
decision and that it believed it had "overwhelmingly
demonstrated" that the deal had no legitimate competitive
issues. The California-based biotech, which had hoped to close
the deal in the first half of this year, said it would work with
the court to complete the transaction by mid-December.  
    The suit drove Horizon's stock price down more than 15% and
also pushed down shares of biotech companies Seagen Inc  SGEN.O 
and Prometheus Biosciences  RXDX.O , which recently struck deals
to be bought by major drugmakers Pfizer Inc  PFE.N  and Merck &
Co  MRK.N , respectively.
    "The FTC has signaled its determination to scrutinize pharma
mergers more carefully," former FTC commissioner William Kovacic
said in an email. He said the commission's decision to try to
block the deal, rather than pursue a settlement, suggests the
FTC does not believe previous settlements adequately fixed the
perceived competitive issues.
    Amgen announced plans to buy Horizon in December, saying
that its rare disease drugs would offer it some protection from
the drug pricing provisions of the Inflation Reduction Act,
which are aimed at drugs most widely used by the government's
Medicare health plan.
    One month later, Democratic Senator Elizabeth Warren wrote
to FTC Chair Lina Khan asking her to scrutinize the deal for
antitrust violations and to oppose it if the agency found them. 
    In the letter, Warren said Tepezza costs nearly $433,000 per
course and pointed out both companies' histories of raising
prices on their drugs.
    Amgen sees revenue from the Horizon medicines helping to
offset increased competition that has eroded sales of its
blockbuster rheumatoid arthritis drug Enbrel. Other key drugs in
Amgen's product portfolio, such as psoriasis therapy Otezla,
face the loss of patent protections over the next few years.
    The FTC, which currently has three Democratic commissioners,
voted 3-0 to approve the challenge to the Amgen-Horizon deal.
    BMO Capital Markets analyst Evan Seigerman said he believes
the FTC's arguments are "overly broad and at best hypothetical,"
and expects the deal to eventually close. Still, he said
Pfizer's $43 billion takeover of Seagen could face a similar
challenge.
    Jefferies analyst Michael Yee said drugmakers may change how
they view M&A targets based on this FTC case to emphasize
smaller companies or those with products still in clinical
trials.
    Shares of some companies viewed as potential acquisition
targets like Sarepta Therapeutics  SRPT.O  and BioMarin
Pharmaceutical  BMRN.O  were down more than 3%. 
    The last major pharmaceutical deal approved by the FTC was
AstraZeneca's  AZN.L  $39 billion acquisition of Alexion Pharma
in April 2021, about two months before Khan was appointed by the
Biden administration.

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 (Reporting by Diane Bartz in Washington, Michael Erman in New
York, and Leroy Leo and Khushi Mandowara in Bengaluru; editing
by Caroline Humer and Bill Berkrot)
 ((Rami.Ayyub@thomsonreuters.com;))