Amgen will buy Horizon Therapeutics for $28.3 billion in the biggest biopharma deal of the year. In response, HZNP stock surged to an eight-month high.
Under the terms of the deal, Amgen will pay $116.50 per share of Horizon stock. The price represents a 47.9% premium to the closing price of HZNP stock on Nov. 29, the day before the company announced it was in acquisition talks.
Initially, there were three potential suitors, including Sanofi and Johnson & Johnson. The former dropped out over the weekend, while J&J dropped out a week earlier. That left Amgen to buy Horizon, a maker of rare disease drugs. Horizon is known for thyroid eye disease drug Tepezza, gout treatment Krystexxa and Uplizna, a medicine for an inflammatory disease.
"The acquisition will bring a number of new medicines into Amgen's portfolio including Tepezza, Krystexxa and Uplizna, which are expected to generate just over $3.3 billion in 2023 revenue, according to current consensus," William Blair analyst Matt Phipps said in a note to clients.
On the stock market today, HZNP stock surged 15.5% to 112.36. Amgen stock fell 0.7% to 276.78.
HZNP Stock: Amgen's Biggest Deal
The biggest biopharma deal of the year is also Amgen's biggest deal ever, RBC Capital Markets analyst Gregory Renza said in a note. Amgen paid $13.4 billion for psoriasis drug Otezla in 2019, $10.4 billion for Onyx in 2013 and $16 billion for Immunex in 2001.
"A high focus on (mergers and acquisitions) from Amgen should come as no surprise, though the size and target will undoubtedly generate debate (and intrigue) given such a move may buck past conservative deal trends," he said.
Horizon brings Amgen "compelling revenue growth, efficiency opportunities and pipeline potential," SVB Securities analyst David Risinger said in a report. Beyond Horizon's three well-known growth drivers, the company also has earlier-stage drugs in testing for immune system disorders like IgG4-related disease, Sjogren's syndrome and lupus. It's also testing a drug for myasthenia gravis, a neuromuscular condition.
Amgen needs growth, RBC analyst Renza said. Shares went on a tear earlier this fall after the company announced promising results from its early-stage obesity treatment. In general, Amgen has focused its buyouts on areas of expertise.
"To an extent, Horizon hits that mold well, with a young, yet maturing product portfolio and blockbuster status in the inflammatory space," he said. He noted HZNP stock analysts expect Tepezza to peak at $4 billion in thyroid eye disease sales and for Krystexxa to reach $1.5 billion in sales.
Highly Rated Biotech Stocks
Both Amgen and Horizon stocks are highly rated, according to IBD Digital. HZNP stock has a strong Relative Strength Rating of 94, meaning its 12-month performance has ranked in the top 6% of all stocks regardless industry group. Amgen stock has a matching RS Rating.
Shares of both are also well above their key moving averages, MarketSmith.com shows. HZNP stock shot up to that level in late November on news of the preliminary acquisition talks with Amgen, J&J and Sanofi.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
