The FTC Just OK-ed a Pharma Merger. Here’s the Deal with Amgen.
Key Takeaways
- This week, the FTC said Amgen can acquire Horizon for $27.8 billion
- This after the FTC had expressed antitrust concern in the pharmaceutical industry
- Analysts are watching this deal to see what it might mean for the future of pharma
The FTC will allow Amgen to move forward with its $27.8 billion acquisition of Horizon Therapeutics. What will this mean for Amgen and for other pharma deals? We’ll explain.
Why is the Amgen deal a big deal?
First of all: it’s big money. Even more notably, Amgen’s acquisition of Horizon was the first biotech deal challenged since the FT launched a pharmaceutical merger task force in 2021 — a response to an increasingly consolidated industry.
The FTC is clearly unsure that a court would agree that competition would be stifled by Amgen’s “bundling” of drugs in deals with insurers.
Horizon adds some beneficial drugs to Amgen’s portfolio, like a thyroid eye disease medication and a gout drug, but there’s even more financial gain than that. Horizon offers Amgen “potentially a better tax jurisdiction related to Irish manufacturing plants … Amgen has a new manufacturing process they could potentially move there,” said Yaron Werber, an analyst at TD Cowen.
What are the implications for other pharma deals?
Some analysts are saying that the FTC’s decision here will be good for pharma business because it indicates that other large deals are more likely to go through. An example the whole sector is watching is Pfizer’s proposed $43 billion purchase of Seagen, a cancer drug developer.
On the other side, some are saying that we can’t predict the FTC’s next move based on this one. Furthermore, there are restrictions imposed on Amgen as part of this settlement that could have broader implications.
Those restrictions prevent Amgen from bundling any of its products with two of Horizon’s most notable drugs. That means no rebates or discounts on existing products that would incentivize insurers to favor Horizon products.
FTC Chair Lina Khan made it clear that the antitrust pressure persists. The FTC will “continue to challenge unlawful practices that raise drug prices, inhibit access, stifle innovation, or otherwise hurt patients,” Khan said.
The bottom line
We don’t think the FTC is scaring pharma away from M&A. We do tend to agree with Wells Fargo analysts who said pharmaceutical industry is likely to “think more” before pursuing a big merger. “We are of the view that FTC is scrutinizing bigger deals more,” they wrote, suggesting that companies may “want to stay under the radar with sub $10–15B deals.”
$15 billion is nothing to sneeze at. And for now, Amgen stock is up 1.26% today.
