The Federal Trade Commission is suing to block a potential $27.8 billion deal Tuesday by pharmaceutical giant Amgen (AMGN) to acquire biotech Horizon Therapeutics (HZNP).
The agency said in a statement Amgen would leverage its ability to “pressure insurance companies and pharmacy benefit managers (PBMs) into favoring Horizon’s two monopoly products: Tepezza, used to treat thyroid eye disease, and Krystexxa, used to treat chronic refractory gout.”
The Commission voted unanimously, 3-0, to seek a temporary restraining order and preliminary injunction.
The deal in question, first announced in December 2022, would be the largest in Amgen’s history, and one of the biggest to-date for 2023. The move, first reported by Bloomberg Monday night, negatively impacted both companies’ stocks. Horizon was down about 15% Tuesday, while Amgen’s stock was down less than 1%.
“Rampant consolidation in the pharmaceutical industry has given powerful companies a pass to exorbitantly hike prescription drug prices, deny patients access to more affordable generics, and hamstring innovation in life-saving markets,” said FTC Bureau of Competition Director Holly Vedova in a statement.
“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,” Vedova added.
In a statement to Yahoo Finance, Amgen said it “remains committed to completing this acquisition, which will bring significant benefits to patients suffering from very serious rare diseases in the US and around the world. We have been working cooperatively over the past several months to address the questions raised by the FTC’s investigative staff and believe we have overwhelmingly demonstrated that this combination poses no legitimate competitive issues.”
Analysts are waiting to see how the FTC will defend its stance, since the companies don’t have any overlapping products, and the concerns about Amgen leveraging its market power to provide higher rebates in order for favored placement with PBMs are not traditionally what the FTC would go after.
Investors see the deal as one that would help Amgen acquire products that are protected against Medicare negotiations, as part of the Inflation Reduction Act, as well as boost its pipeline amid patents expiring for some of its major drugs in the near future.
Horizon said in a statement that, “The FTC’s complaint impacts patients and is rooted in a theory about potential future ‘bundled’ contracts with payors and not competitive overlap concerns. Horizon does not and has no plans to bundle any of its rare disease medicines.”
Prior to the FTC suit, SVB analysts said they were awaiting more information.
“Our assumption is that the FTC could try to make the case that Amgen’s presence in autoimmune disease and immunology would overlap with certain Horizon franchises and autoimmune disease R&D programs. But we question whether the FTC would have substantial evidence that the transaction would actually be anti-competitive,” the analysts said in a note Tuesday.
Meanwhile, Jeffries analysts think the deal will eventually go through, but be delayed by the FTC’s suit.
“We understand the FTC and current administration is prepared to continue its more aggressive strategy to deter M&A even if legal merits are not strong as Amgen doesn’t have any overlap or anti-competitive dynamics with Horizon. We estimate a potential 3-5 month delay for legal timeline and more clarity by Fall 2023,” Jefferies’ analysts said in a note Tuesday.
Both analysts correctly predicted the two drugs FTC would have an issue with, Tepezza and Krystexxa, as they both are orphan drugs — meaning they don’t have competition in the market and treat rare diseases.
Experts are watching the lawsuit closely as it could impact others. That includes Pfizer’s (PFE) potential $43 billion acquisition of Seagen (SGEN), which was filed to the FTC last week. Amgen had also previously been a bidder for Seagen. The FTC has two weeks to take action.
Follow Anjalee on Twitter @AnjKhem
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