Amgen has agreed to acquire Horizon Therapeutics for approximately $27.8 billion, the companies said today—the year’s biggest biopharma acquisition deal to date, and one intended to replenish the buyer’s rare autoimmune, and inflammatory disease portfolios as its top-selling drug begins to lose patent exclusivity in the coming year.
That drug, Enbrel® (etanercept), faces the start of its loss of exclusivity (LoE) on June 8, 2023, for patents related to its methods of treatment using aqueous formulations.
Amgen emerged from a trio of would-be buyers that held talks in recent weeks for Horizon, a developer of drugs for rare, autoimmune, and severe inflammatory disease that is headquartered in Dublin, Ireland, with its U.S. HQ in the Chicago suburb of Deerfield, IL.
The other two would-be buyers were Johnson & Johnson and Sanofi, creating a competition that lifted Horizon’s shares by nearly 30%. J&J dropped out of talks on December 3, and Sanofi did likewise on Sunday, clearing the path for the Thousand Oaks, CA, biotech giant to come to terms with Horizon.
At $116.50 per share, the deal price represents a premium of about 47.9% over the closing share price of $78.76 on November 29, before the company announced the possibility of a Horizon buyout under Rule 2.4 of the Irish Takeover Rules—and a premium of approximately 19.7% to the closing price of $97.29 per share on Friday.
“The acquisition of Horizon is a compelling opportunity for Amgen and one that is consistent with our strategy of delivering long-term growth by providing innovative medicines that address the needs of patients who suffer from serious diseases,” Amgen chairman and CEO Robert A. Bradway said in a statement. “Additionally, the potential new medicines in Horizon’s pipeline strongly complement our own R&D portfolio.”
Investors did not appear to share that enthusiasm. Amgen shares dipped about 1% Monday, to $276.78. ET, from $278.65 at the close of trading Friday. Horizon shares rose just 15%, to $112.36 from $97.29.
Too high a price?
At $27.8 billion, the deal price may have been seen by some investors as too high, in a biotech mergers-and-acquisitions market whose previous top deal of 2022 was Pfizer’s $11.6 billion purchase of Biohaven Pharmaceuticals, completed in October.
“The size and target will undoubtedly generate debate (and intrigue) given such a move may buck past conservative deal trends,” Gregory Renza of RBC Capital Market wrote in a research note, as reported by Investors Business Daily.
However, Renza noted that the deal was in line with several past eight-figure acquisitions by Amgen, including Immunex (bought out for $16 billion in 2002); Onyx Therapeutics (for $10.4 billion in 2013); and the buyer’s third-best-selling drug, Otezla® (acquired for $13.4 billion from Bristol Myers Squibb [BMS]).
“A high focus on (mergers and acquisitions) from Amgen should come as no surprise,” Renza wrote.
Horizon is Amgen’s second major biotech acquisition this year, which was also focused on bolstering its rare disease pipeline. In October, Amgen completed a $3.7 billion purchase of ChemoCentryx, a deal that added to the buyer’s portfolio Tavneos® (avacopan), a first-in-class treatment for antineutrophil cytoplasmic antibody (ANCA)-associated vasculitides (AAV), a rare, systemic autoimmune disease.
“1) The strategic fit makes sense, 2) It enhances Amgen’s growth prospects over the near-medium term and will help offset the negative impact of mid-decade LOEs, and 3) It brings a number of potentially high-value pipeline candidates,” David Risinger, head of diversified biopharmaceutical research and a senior managing director with SVB Securities, wrote in a research note.
The price for Horizon, coming between $25 billion and $30 billion “would be even more attractive” than the $30 billion price speculated by analysts and others in days before the announcement, Jefferies analyst Michael Yee countered. At $30 billion, he estimated the Horizon acquisition could add 7% to the price of Amgen shares in 2024, 9% in 2025, and 20% by 2029 based on operating expense cuts or “synergies” of 25% to 50%.
“We continue to see the deal as reasonable and strategic for AMGN’s long-term growth and AMGN is in an even better position today than a year or two ago,” Yee wrote.
Yee cited: Amgen’s long-term guidance of mid-single digit revenue growth through 2030; the expectation that Amgen’s obesity candidate AMG-133, which has completed patient enrollment in a Phase I trial, will be a blockbuster; Amgen’s stock price trading near its all-time high; and confidence that Amgen can offset a lot of the long-term loss of exclusivity risk it faces from its portfolio of biosimilars.
Without furnishing figures, Amgen said it expected the Horizon purchase to add to its revenue and non-GAAP earnings per share starting in 2024. Amgen is not providing or updating 2022 or 2030 investor guidance as a result of the deal.
$500M in cost reductions
Amgen and Horizon estimated the combined company could reduce its pre-tax costs by at least $500 million by the end of the third fiscal year following completion of the acquisition deal.
The prospect of that reduction was one of Amgen’s rationales for acquiring Horizon. Other reasons given by the company include:
- Horizon’s complementary portfolio of treatments for rare diseases.
- Amgen’s 20-year legacy in inflammation and nephrology and global scale, both of which the buyer said will enhance the growth potential of Horizon’s portfolio….
- … by capitalizing on Amgen’s research-and-development, process development, and global manufacturing expertise in biologic medicines.
- The combined company’s approximately $10 billion in cash flow over 12 months through Q3 2022, and expectation of accelerated revenue growth.
To fund the acquisition, Amgen has entered into a $28.5 billion Bridge Credit Agreement with Citibank as administrative agent, Bank of America as syndication agent, and both banks as co-lead arrangers and book runners.
Amgen’s marketed drug portfolio is led in sales by Enbrel, which has generated $3.019 billion in product sales during the first three quarters of this year, down nearly 2% from $3.357 billion in Q1-Q3 2021.
In the third quarter alone, Enbrel racked up $1.106 billion in product sales, down 14% from $1.289 billion in Q3 2021—a decline that according to Amgen reflected a lower net selling price due to competing drugs, a 3% decline in sales volume, and a 5% decline from unfavorable changes to estimated sales deductions.
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.
Protection through 2037
In addition to its methods patents, Enbrel is protected by fusion protein and pharmaceutical compositions patents expiring November 22, 2028; DNA encoding fusion protein and methods of making fusion protein patents expiring April 24, 2029; and patents on its formulations expiring October 19, 2037.
Amgen’s second best-selling drug, Prolia® (denosumab), is a RANK ligand inhibitor that generated $2.636 billion in product sales from January–September 2022, up 11% from $2.375 a year earlier. Amgen bought Prolia when it acquired Abgenix for approximately $2.2 billion in a deal completed in 2006.
Prolia is indicated to treat postmenopausal women with osteoporosis at high risk for fracture; men with osteoporosis at high risk for fracture; men and women with glucocorticoid-induced osteoporosis and at high risk for fracture; men at high risk for fracture receiving androgen deprivation therapy for nonmetastatic prostate cancer; and women at high risk for fracture receiving adjuvant aromatase inhibitor therapy for breast cancer.
Otezla product sales during Q1–Q3 stood at $1.672 billion, up 3% from $1.619 in January–September 2021. Amgen acquired Otezla as part of BMS’ $74 billion acquisition of Celgene, citing “concerns” raised by the U.S. Federal Trade Commission (FTC) about the blockbuster deal.
Otezla is a phosphodiesterase 4 (PDE4) inhibitor 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.
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 adult patients refractory to conventional therapy.
During the first three quarters of this year, Tepezza’s net sales leaped 37%, to $1.472 billion from $1.072 billion a year earlier, while Krystexxa net sales jumped 27%, to $500.1 million from $395.2 million. Tepezza and Krystexxa co-anchor Horizon’s orphan drug segment, whose combined net sales from eight marketed drugs grew 32% year-over-year, to $2.58 billion from $1.955 billion.
In reporting third-quarter results on November 2, Horizon raised its investor guidance on full-year 2022 net sales to between $3.59 billion and $3.61 billion, compared to the previous range of $3.53 billion to $3.60 billion.
Horizon also raised guidance on ex-U.S. net sales of Tepezza from more than $500 million to more than $1 billion, citing further assessment of the ex-U.S. thyroid eye disease market opportunity and plans to launch the drug in Europe. Horizon maintained an earlier forecast of U.S. peak annual net sales of more than $3 billion, bringing global peak annual net sales expectations to greater than $4 billion.
The company also increased its U.S. peak annual net sales expectations for Krystexxa to greater than $1.5 billion from greater than $1 billion, citing use of the drug with immunomodulation in more than 60% of new patients, as well as “increased clinical conviction among physicians.”
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.
“In nearly 15 years, we have built one of the fastest growing and most respected companies in the biotechnology industry from the ground up,” Horizon chairman, president, and CEO Tim Walbert stated. “We have accomplished a tremendous amount for patients, their families, and our customers, and created significant value for shareholders. These accomplishments are all rooted in our employees’ deep commitment, dedication, and personal passion for those impacted by rare, autoimmune, and severe inflammatory diseases.”
“Amgen is aligned with that commitment and passion and will continue to maximize the value of the current portfolio and pipeline and accelerate the ability to reach more patients globally,” Walbert added.