PFE - FTC suit against Horizon deal may have chilling effect on biotech M&A

2023-05-16 14:04:07 ET

The Federal Trade Commission's lawsuit seeking to stop Amgen's ( NASDAQ: AMGN ) acquisition of Horizon Therapeutics ( HZNP ) could negatively impact current and future biotech deals, according to two Street firms.

Wells Fargo noted that if the FTC's intent is to stop large deals, then it could make investors nervous about Pfizer's ( PFE ) $43B acquisition of Seagen ( SGEN ).

"Big Biopharma may have challenge from now on while targeting mid-sized ($20-50B) deals," noted analyst Mohit Bansal.

"While AMGN and HZNP marketed products do not overlap, recent FTC scrutiny seems to be pushing it a bit further than traditional overlapping markets and investigating if a single player is becoming stronger," he wrote.

Bansal added that Amgen ( AMGN ) shareholders were not that enthusiastic about the deal. If it does fall through, he sees fair value of the stock at $255/share. The biotech would also need to shell out ~$1.8B ($3/share) in termination and debt redemption fees.

Horizon ( HZNP ) would likely fall to $80-$90 per share, he said.

Piper Sandler analyst Christopher Raymond called the suit "a new and unprecedented challenge."

"FTC would be signaling not just a more aggressive enforcement approach, but one that appears punitive and arbitrary, in our view," he added.

"We think the success penalty exacted on smid caps that ultimately bring a therapy across the goal line is likely to impact investment calculus for even the most early-stage program in the long run," he continued.

Raymond argued that Horizon's ( HZNP ) Tepezza (teprotumumab)  for thyroid eye disease does not overlap therapy areas Amgen ( AMGN ) is focused on, such as oncology and cardiology. "Given this, we have no conclusion other than FTC's actions here are punitive, rather than designed to protect the consumer."

As a result of the suit, Raymond anticipates more early-stage deals.

"Any smid cap asset that’s newly or nearly commercial has overnight lost an important exit ramp, forcing a go-it-alone-only path," he said.

More on Amgen/Horizon

Amgen expected to mount a `very aggressive' defense if FTC sues to block Horizon Therapeutics - CNBC

Amgen: Questioning The Horizon Therapeutics Acquisition

What Amgen Is Getting Through The Acquisition Of Horizon Therapeutics

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