Market observers are almost 100 per cent certain that Amgen will complete its $28 billion (€25.8 billion) takeover of Irish-based Horizon Therapeutics after the US Federal Trade Commission (FTC) paused its in-house case to block the deal.
Horizon shares have jumped 5.4 per cent this week to $112.36 following the anti-trust regulator’s late Friday order that allows Amgen and Horizon to propose a settlement that would negate the need for further litigation. The surge leaves Horizon stock roughly $4 below Amgen’s $116.50 offer, the narrowest spread on a closing basis since May, and down from a gap of nearly $10 at Friday’s close.
The pricing indicates the market sees more than a 90 per cent probability that the deal will close, up from 70 per cent to 80 per cent over the last several weeks, according to Brett Buckley, an event-driven strategist at WallachBeth Capital.
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Although many merger-arbitrage investors expected the deal to close whether or not it went to court, “it is highly likely it will close sooner now”, Buckley added.
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The FTC sued in May to block the proposed tie-up, which was announced in December, arguing it would limit competition for the development of treatments for serious illnesses. It was the first challenge to a pharmaceutical deal in more than a decade.
The agency argued the merger would allow Amgen to entrench Horizon’s monopoly on medications for thyroid eye disease and chronic refractory gout.
Amgen has 27 approved drugs, including blockbuster treatments like Enbrel for rheumatoid arthritis and Otezla for psoriasis. Horizon distributes 11 drug products in the US, including Tepezza, used to treat thyroid eye disease, and Krystexxa, for chronic refractory gout, which do not face competition, the FTC said.
In 2022, Tepezza brought in $1.97 billion in revenue and Krystexxa $716 million in revenue for Horizon, according to company filings.
In a statement, Amgen said it has no intention to bundle Horizon’s drugs with its own.
“We would be pleased if our commitment were honoured instead of going through a lengthy court process,” the company said.
A September 13th federal court hearing remains scheduled on the FTC’s request to pause the transaction ahead of the in-house trial.
Aggressive approach
The FTC, under chairwoman Lina Khan, has taken an aggressive approach to mergers, challenging a number of high-profile deals. But the agency has struggled in court, losing merger cases this year to block a Meta acquisition and Microsoft’s Activision Blizzard deal.
The latest move also sends a positive signal for Seagen’s pending $43 billion acquisition by Pfizer, which is in the crosshairs with a second FTC request under way. Seagen has gained 3.5 per cent this week to about $207, compared with the takeover offer price of $229 per share.
Should FTC reach a settlement on the Horizon-Amgen deal, it “could improve the tone on broader M&A activity in the sector”, said Gregory Renza, an analyst at RBC Capital Markets, in a research note.
Horizon is one of the most widely held positions for merger-arbitrage traders. While the FTC’s block stunned many hedge funds and deal speculators, they continued to bet the companies would win in the dispute. In a July Bloomberg survey, 14 of 15 merger-arb market participants polled said they expected the deal to ultimately go through. — Bloomberg
