Amgen: Regardless of FTC Negotiations and the Ultimate Fate of the Horizon Deal, No FVE Change

We’re not making any changes to our $255 fair value estimate or wide moat rating for Amgen AMGN following the news that the U.S. Federal Trade Commission seeks to block Amgen’s pending acquisition of Horizon Therapeutics. Since the announced pending acquisition of Horizon in December, we have seen the acquisition as neutral to Amgen’s valuation, bringing valuable rare disease and immunology drugs but at a steep $28 billion price tag. We expect negotiations to continue over the next few months, as the FTC could be looking for Amgen to make broader commitments regarding future bundling practices and Horizon’s portfolio and pipeline.

The FTC has historically scrutinized acquisitions that could give an established incumbent in a therapeutic area an even stronger edge against competitors, including Roche’s delayed acquisition of Spark Therapeutics due to concerns about hemophilia A market competition. However, in this case, Horizon’s portfolio—dominated by thyroid eye disease drug Tepezza and gout drug Krystexxa—has no clear overlap with Amgen’s portfolio. In fact, even more broadly, Horizon’s pipeline, while focused on immunology, does not appear to have any significant overlap with Amgen’s immunology portfolio or pipeline. The FTC statement included concerns that Amgen could offer multiproduct discounts, using its existing portfolio as leverage for payer coverage of Horizon’s drugs if new competitors reach the market and threaten their monopolies. There does not appear to be precedent for the FTC blocking a deal due to fears that the firm could bundle drugs and gain an unfair advantage in the marketplace. For example, AstraZeneca’s 2021 acquisition of rare disease firm Alexion went through without delay. We think this new focus could theoretically delay or derail many acquisitions by a large biopharma player, particularly those in rare diseases, where the target often has an existing monopoly.