Amgen stock rose Friday after the Federal Trade Commission dropped its lawsuit, clearing the way for the biotech giant to buy Horizon Therapeutics for $28 billion.
The decision wraps up a months-long battle in which the FTC sued to prevent the deal. The FTC had argued Amgen could use its size and relationships with large pharmacy benefit managers to entrench monopolies of Horizon's two biggest products. Horizon sells Tepezza, a treatment for thyroid eye disease, and Krystexxa, a chronic gout treatment.
Piper Sandler analyst Christopher Raymond notes the settlement bodes well for business deals in the biotech space. Still pending, Pfizer is buying Seagen for $43 billion and Biogen has $7.3 billion tied up in its plan to acquire Reata Pharmaceuticals.
"Back in May, when the FTC filed its suit, we opined that if this signaled a meaningful policy change, we would have to think differently about biotech investing, as (mergers and acquisitions) is in many ways the lifeblood of biotech's long history of innovation," he said in a note to clients. "Since that time, many have speculated that FTC knew its legal stance was somewhat tenuous in this matter."
On today's stock market, Horizon stock rose 2.3%, closing at 115.30. Shares broke out of a consolidation with a buy point at 113.83, according to MarketSmith.com. Amgen stock also edged 0.1% higher, ending the regular session 256.71.
Amgen Stock: Deal Outlook Improved
Analysts noted it appears likely the FTC could sign off on the Amgen-Horizon deal last week when the regulator withdrew its request for an in-house trial related to the lawsuit. A judge had recently urged the FTC and companies to discuss a settlement.
William Blair analyst Matt Phipps also noted there was no precedent for the FTC to block Amgen's acquisition of Horizon. Amgen doesn't sell any products that rival Tepezza or Krystexxa.
"Therefore, today's announcement of a settlement is not particularly surprising," he said in his note to clients.
Once the acquisition wraps — expected in the fourth quarter — Amgen won't be able to condition any product rebate or contract terms related to an Amgen product on the sale or positioning of either one of the Horizon drugs, Phipps said. Amgen also won't be allowed to acquire any new products that treat thyroid eye disease or chronic gout without FTC permission.
Following the deal's close, Phipps expects Amgen to earn $19.01 per share, on an adjusted basis, this year. That's up from his prior estimate for $17.83. He has a market perform rating on Amgen stock.
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