The U.S. Federal Trade Commission (FTC) said it will challenge Amgen’s planned $27.8 billion acquisition of Horizon Therapeutics—drawing a rebuke from the biotech giant, which is vowing to oppose the agency and fight for the deal it announced just over five months ago.
The FTC has filed a complaint in the U.S. District Court for the Northern District of Illinois to block the acquisition. (Federal Trade Commission v. Amgen, 1:23-cv-03053). Commissioners voted 3–0 to file the administrative complaint, as well as authorize agency staff to file a federal lawsuit seeking a temporary restraining order and preliminary injunction against Amgen.
The FTC had not made public its administrative complaint at deadline, but announced in a press release that the filing alleged that Amgen’s acquisition of Horizon would allow Amgen to leverage its portfolio of blockbuster drugs to entrench the monopoly status of two Horizon treatments.
Horizon generates growing net sales from its top two marketed drugs, Tepezza® (teprotumumab-trbw), an insulin-like growth factor-1 receptor inhibitor indicated to treat thyroid eye disease; and Krystexxa® (pegloticase), a PEGylated uric acid specific enzyme indicated for the treatment of chronic gout in adults that is refractory to conventional therapy.
According to the FTC, the acquisition deal would enable Amgen to use rebates on its blockbuster drugs to pressure insurance companies and pharmacy benefit managers (PBMs) into favoring Tepezza and Krystexxa.
“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,” FTC Bureau of Competition Director Holly Vedova said 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,” added Vedova, a career FTC official who has served as attorney advisor to four commissioners since joining the FTC in 1990.
Disappointed and committed
Amgen wasted little time responding to the FTC complaint.
“Amgen is disappointed by the FTC’s decision and remains committed to completing this acquisition, which will bring significant benefits to patients suffering from very serious rare diseases in the U.S. and around the world,” the company stated. “We firmly believe in the benefits of this acquisition and intend to work with the court on a schedule that would allow the transaction to close by mid-December.”
Amgen asserted that it had worked cooperatively over the past several months to address questions raised by the FTC’s investigative staff, and “believe we have overwhelmingly demonstrated that this combination poses no legitimate competitive issues.”
According to Amgen, the marketed drugs of both companies generally treat different diseases and patient populations: “There are no overlaps of competitive concern.”
Brian P. Skorney, CFA, a senior research analyst with Baird, agrees with Amgen on that point.
“There really isn’t a good argument, in our view, that substantial overlap exists between the two companies that is meaningfully anti-competitive, at least as far as precedent goes,” Skorney wrote Tuesday in a research note.
Investors responded coolly to news of the FTC action. News reports Monday afternoon sent Horizon shares falling 15% in post-market trading. That decline grew to 19% in early Tuesday trading, from Monday’s close of $112.25 to $90.98 as of 9:48 a.m. ET, before the price bounced back to $96.34 at the closing bell, for a 14% decline.
In announcing plans to stop the Amgen-Horizon deal, the FTC asserted that the deal presented Amgen with “strong” incentives to raise barriers to entry for competing products to Tepezza and Krystexxa, or dissuade competitors from having their treatments compete as aggressively with the Horizon drugs if and when they gain FDA approval.
“Amgen has a history of leveraging its broad portfolio of blockbuster drugs to gain advantages over potential rivals,” the FTC stated.
In the past, the FTC argued, Amgen had engaged in cross-market bundling, which involves conditioning rebates (or offering incremental rebates) on products in exchange for giving Amgen drugs preferred placement on the insurers’ and PBMs’ lists of covered medications in different product markets.
“The deal could give the merged firm the ability and incentive to entrench Tepezza’s and Krystexxa’s monopolies through its multi-product contracting strategies,” the FTC added. “This could effectively deprive patients, doctors, and health plans from the benefits of competition and access to critical new options for treatment of thyroid eye disease and chronic refractory gout.”
That would not happen under an Amgen-Horizon deal, Amgen countered.
“The FTC’s claim that Amgen might ‘bundle’ these medicines (offer a multi-product discount) at some point in the future is entirely speculative and does not reflect the real-world competitive dynamics behind providing rare-disease medicines to patients. And we committed that we would not bundle the Horizon products raised as issues; however, the Commission still decided to pursue this path.”
Skorney the Baird analyst said the FTC’s bundling argument draws upon a similar complaint Regeneron Pharmaceuticals filed against Amgen, accusing it of effectively shutting out Regeneron/Sanofi co-marketed Praluent® (alirocumab) from PBM formulary access in order to favor two Amgen drugs, Otezla® (apremilast) and the company’s top-selling drug Enbrel® (etanercept). Earlier this year, a judge denied a motion by Amgen to dismiss the case.
“This is interesting because Otezla was the last large acquisition Amgen did and creates a potential opening for an argument by the FTC that there is a precedent of acquiring assets for an anti-competitive bundling practice,” Skorney recalled. “This would be a pretty big jump in FTC reach, but the Chair has been signaling an intent to expand scope on pharmaceutical mergers, so it wouldn’t be surprising for them to try something out of the box.”
“The FTC just might not have the actual law on their side,” Skorney added.
Otezla is a phosphodiesterase 4 (PDE4) inhibitor acquired for $13.4 billion from Bristol Myers Squibb [BMS] in 2019, and is indicated for adults with active psoriatic arthritis, plaque psoriasis who are candidates for phototherapy or systemic therapy, and oral ulcers associated with Behçet’s disease.
Launched by Immunex in 1998, Enbrel is a tumor necrosis factor blocker that is indicated primarily to treat adults with moderately to severely active rheumatoid arthritis, patients with chronic moderate-to-severe plaque psoriasis who are candidates for systemic therapy or phototherapy, and patients with active psoriatic arthritis.
The FTC also quoted from Horizon’s Form 10-K annual report for 2022, filed March 1, in which the company stated that Tepezza “has no direct approved competition,” while Krystexxa “faces limited direct competition.”
The agency also took issue with the list price for both drugs—approximately $350,000 for a six-month course of treatment of Tepezza and approximately $650,000 for an annual supply of Krystexxa. Horizon states on its website that patients who are prescribed Horizon treatments “will receive support on anything from insurance and cost assistance options to coordinating appointments and more” if they enroll in the company’s Horizon Horizon By Your Side personalized patient support program.
Tepezza is Horizon’s best-selling treatment, generating $405.3 million in net sales during the first quarter—down 19% from $501.5 million in Q1 2022. According to Horizon, the drop reflected a seasonal fluctuation in uptake of the drug, plus little impact from a late 2022 expansion of its sales “field force” for Tepezza.
“More recently, the Company has seen the expansion drive positive momentum in the business, including increases in new prescribers, patient enrollment forms and patient starts. As new prescribers and patients work through the reimbursement process, the Company expects a more meaningful impact to net sales later in the year,” Horizon stated on May 3 when it reported first quarter results.
Krystexxa is Horizon’s second-best selling drug, with net sales of $187 million in Q1, up 33% from $140.7 million in the year-ago quarter. While net sales declined by 13% from Q4 due to seasonal uptake, Horizon said it enjoyed continued momentum in both the rheumatology and nephrology market segments, including the adoption of Krystexxa with immunomodulation as the new standard of care following FDA approval in July 2022 for an expanded label to include Krystexxa with methotrexate.
“The Company’s efforts to educate physicians and key stakeholders continues to lead to strong patient growth from both new and existing prescribers across both market segments,” Horizon further stated.
In addition to its 12 marketed medicines, Horizon has a pipeline with more than 20 development programs. Furthest along is Uplinza® (inebilizumab-cdon), which is in Phase III trials for the prevention of flare in IgG4-related disease (NCT04540497), and for improving outcomes in myasthenia gravis (NCT04524273). Uplinza is a humanized, affinity-optimized, afucosylated IgG1 kappa (IgG1κ) monoclonal antibody that binds to the B cell-specific surface antigen CD19.
Horizon is unrelated to Horizon™, the gene editing and gene modulation tool company that was acquired in 2020 by PerkinElmer for approximately $383 million.