News that federal regulators will oppose Amgen (AMGN)’s announced $27.8 billion buyout of Horizon Therapeutics (HZNP) began to send Horizon’s shares tailspinning Monday evening into early today—and raises questions about how solidly merger-and-acquisition (M&A) activity will bounce back from pandemic lows this year.

The U.S. Federal Trade Commission (FTC) announced Tuesday that it will oppose the Amgen-Horizon deal on grounds that it will stifle innovation and the development of new drugs.

“If the FTC does move forward, we think it would be one of the weakest recent cases we’ve seen,” Jefferies analyst Akash Tewari wrote Tuesday in a research note.

“We see no sig[nificant] overlap for AMGN/HZNP and don’t think FTC’s potential ‘bad actor’ or ‘bundling’ claims would hold up. We’d buy on this dip pending conf[irmation] both AMGN/HZNP are willing to litigate FTC challenge,” Tewari observed, adding that the FTC’s case could take more than six months to play out.

The FTC’s intent to block the deal was first reported Monday after the close of the market by news outlets that included The Capitol Forum, Bloomberg News, and Reuters. Those reports sent Horizon shares falling 15% in post-market trading Monday evening, a decline that grew to 19% in early Tuesday trading as of 9:48 a.m. ET, from Monday’s close of $112.25 to $90.98, before the price bounced back to $96.34 at the closing bell, for a 14% decline.

Amgen shares dipped about 2%, from $233.53 to $229.90.

“For AMGN stock specifically, we think this was going to be a relatively close to NPV [net present value]-neutral deal anyway, so whether it goes through or not, AMGN shares are unlikely to be materially impacted, in our view,” Brian P. Skorney, CFA, a senior research analyst with Baird, wrote Tuesday in a research note.

Slamming the brakes

Skorney also said the FTC’s case against Amgen and Horizon could slam the proverbial brakes on biotech M&A just as it is showing the first signs of recovering after the markets turned bearish two years ago.

“Any potential intervention by the FTC to break up this deal has very broad implications for the sector and potential future M&A, as well as Horizon specifically,” Skorney

Government opposition to the larger biotech M&A deals is one key factor that is tamping down M&A activity, Subin Baral, EY Global Life Sciences Deals Leader, told GEN Edge. The other is big-picture economic trends such as inflation and rising interest rates.

“Companies are playing it safe because of a lot of uncertainties around macroeconomics and the regulatory environment. The question that we are asking ourselves is, is ‘playing it safe’ safe anymore?” Baral said.

Playing it safe is not wise, Baral explained, for companies facing “patent cliff” expirations of exclusivity for top-selling drugs. Amgen’s purchase of Horizon, for example, was driven by its need to replenish its rare autoimmune, and inflammatory disease portfolios as its top-selling drug Enbrel® (etanercept), faces the start of its loss of exclusivity (LoE) on June 8, for patents related to its methods of treatment using aqueous formulations.

Enbrel sales during the first quarter skidded 33% during Q1, with Amgen blaming a decline in its net selling price, lower inventory levels compared to previous years and a 9% unfavorable impact of changes to estimated sales deductions related to prior periods.

“If you look at from a patent cliff perspective, from an R&D access perspective, and from the perspective of a lack of very high- quality assets that are potentially out there, how long can you stay on the sidelines?” Baral added.

Surface recovery

Those concerns appear to begin driving M&A activity, which on the surface appears to be recovering this year based on the $55 billion total value of the 11 first-quarter biotech M&A deals tallied by EY—the professional services firm originally known as Ernst & Young. The total value of biotech M&A more than quintupled year-over-year, skyrocketing 441% from the $10.2 billion reported by EY during Q1 2022.

However, nearly all of that dollar volume reflected two megadeals: Pfizer’s $43 billion purchase of Seagen, announced in March, and Merck & Co.’s $10.8 billion takeout of Prometheus Biosciences, disclosed last month. The Q1 figures do not include the Amgen-Horizon deal, which was announced in December 2022.

Worse, the number of biotech M&A deals during Q1 fell 27% year-over-year, from the 15 reported a year ago. Deal volume during the first quarter was lower than for any quarter of 2021 or 2022.

Baral said that companies being acquired were those with marketed drugs and/or drug candidates that were “de-risked” by showing positive and robust data in mid- to late-stage clinical development.

“What we are finding is companies are looking to continue to de-risk themselves,” Baral said. “How do they do that? With the combination of having any assets that are Phase II onwards in the development phase, then also with some marketed products

“There are not that many such de-risked out there. That is creating this continuous tension in the valuation. So, there will be a high premium for high quality assets. That trend is not going to change.”

Baral noted that the largest recent M&A deals were competitive, involving a buyer that outcompeted one or more rivals to land their deal. Amgen emerged from a trio of would-be buyers that included Johnson & Johnson and Sanofi, creating a competition that lifted Horizon’s shares by nearly 30%. Seagen rejected offers from Merck, which was the leading potential buyer last year, before accepting Pfizer’s $229-a-share offer.

But when Pfizer announced the Seagen deal in March, investors only sent shares of Seagen up 14.5% the day of the announcement, from $172.61 to $197.65, based on fears of possible antitrust challenges from the FTC and other global regulators.

Flexing muscle

The FTC has flexed muscle against larger M&A deals that it perceives as creating new monopolies by stifling competition, most notably the ongoing challenges by the agency and the European Union to kill Illumina’s $7.1 billion planned acquisition of cancer blood test developer Grail.

The cost of Illumina’s persistence against regulators has been a key argument of activist investor Carl Icahn, who has calculated that the regulatory battle has shrunk the sequencing giant’s market capitalization (the share price times the number of outstanding shares of a public company) by $50 billion. Icahn has sought since March to change the sequencing giant’s board, management, and direction—a case he recently detailed exclusively on GEN’s “Close to the Edge.”

Another factor driving up interest if not activity in M&A, Baral said, has been continuing declines in two other traditional ways that investors have recouped the capital they have poured into early-stage biotechs. According to EY data,
total biotech IPO value generated in Q1 2023 was $280 million, down 18% from $342 million in the year-ago quarter.

Also during Q1 2023, a total $2.381 billion in venture capital was invested in biotech companies, down 72% from the $8.541 billion invested a year earlier, and lower than any quarter of 2022.

Q1 2022 was by far the biggest quarter for VC fundraising last year, attracting 45% of the entire year’s VC investment—in part because of the eye-popping $3 billion financing round with which Altos Labs™ emerged from stealth mode, launching with the ambitious aim of reversing disease and aging processes that lead to injury, and disabilities through cellular rejuvenation programming. Investigators from Altos recently detailed some of the company’s research at the European Laboratory Research & Innovation Group (ELRIG) Drug Discovery Conference in Cambridge, U.K.

Baral said the challenges facing M&A are driving many biotechs toward acquiring assets through cheaper collaboration and licensing deals.

“We are seeing continued uptick on the collaboration and licensing deals. So, they have always been a feeder to the larger M&A on the back end. We do see that trends are not changing,” Baral said. “Frankly, in the current environment where the M&A is down because of macroeconomics, some regulatory concerns and the headwinds that we are facing, collaboration and joint ventures would continue to be where companies will invest in.”

Leaders & laggards


  • Sarepta Therapeutics (SRPT) shares jumped 31% on Monday, the first trading day after the FDA’s Cellular, Tissue and Gene Therapies Advisory Committee recommended that the FDA grant accelerated approval of SRP-9001 (delandistrogene moxeparvovec) to treat ambulatory Duchenne muscular dystrophy (DMD) patients with a confirmed mutation in the DMD gene. The 8-to-6 vote sets the stage for an expected FDA approval of the first gene therapy indicated for a form of DMD. Opponents urged the advisory committee to postpone action pending the expected release of efficacy data in September from a confirmatory clinical study of SRP-9001. Opponents also raised questions about whether expression of micro-dystrophin was, as Sarepta asserted, a surrogate endpoint that was reasonably likely to predict clinical benefit.

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