December 1, 2023

This text has been revised and up to date from the unique model.

A Federal Commerce Fee lawsuit in search of a preliminary injunction to dam biopharmaceutical big Thousand Oaks-based Amgen Inc. from buying a smaller Irish pharmaceutical firm is using a decades-old antitrust enforcement concept that has observers questioning whether or not biotech and biopharma corporations like Amgen might see their development prospects trimmed sooner or later.

The $27.8 billion deal to accumulate Dublin-based Horizon Therapeutics plc, which was first introduced in December, would allow Amgen so as to add two FDA-designated orphan medication — Tepezza and Krystexxa, that are used to deal with thyroid eye illness and persistent refractory gout respectively — to its portfolio of greater than 24 authorized drugs.

Each are manufactured completely by Horizon and are every used to deal with circumstances that have an effect on lower than 200,000 People.

The FTC grievance towards the deal argues that it might enable Amgen, the second largest public firm within the Los Angeles space, to leverage its portfolio of blockbuster medication to cement an unfair market benefit for Horizon’s two monopoly medication amongst pharmacy profit managers, which oversee drug advantages on behalf of medical health insurance corporations and different payors.

The FTC grievance additionally alleges the acquisition would place Amgen to curry favor with PBMs by providing rebates on Amgen medication in change for the PBMs excluding medication treating these identical circumstances which may be launched to the market by different corporations.

“Rampant consolidation within the pharmaceutical trade has given highly effective corporations a cross to exorbitantly hike prescription drug costs, deny sufferers entry to extra reasonably priced generics, and hamstring innovation in life-saving markets,” Holly Vedova, FTC Bureau of Competitors Director, mentioned in a press release. “At this time’s motion — the FTC’s first problem to a pharmaceutical merger in latest reminiscence — sends a transparent sign to the market: The FTC received’t hesitate to problem mergers that allow pharmaceutical conglomerates to entrench their monopolies on the expense of customers and truthful competitors.”

In a press release, Amgen expressed disappointment by the motion, explaining, “The medicines supplied by Amgen and Horizon typically deal with totally different illnesses and affected person populations, and there aren’t any overlaps of aggressive concern.”

The corporate added that it “wouldn’t bundle the Horizon merchandise raised as points.”  

The corporate mentioned it plans to work with the courtroom on a schedule that might enable the deal to shut by mid-December.

Amgen in December agreed to accumulate Horizon for $116.50 a share. The day earlier than the FTC introduced the lawsuit, Horizon inventory was price $112 a share. Nonetheless, by Could 26 it had dropped to $99.55.

In the meantime, Amgen’s inventory, which traded within the higher $280s in late December and January sunk to $218.53 final Tuesday, near a two-year low for the corporate, mentioned Gregory Renza, a biotech fairness analysis analyst on the international funding financial institution RBC Capital Markets.

Whereas the lawsuit has impacted its inventory worth, the difficulty goes a lot deeper, mentioned Renza, threatening to have an effect on its development technique in addition to that of different companies within the biotech and pharmaceutical sectors.

“Companies like Amgen historically broaden in certainly one of two methods—by exterior innovation from buying smaller gamers within the trade or from inside analysis and growth,” mentioned Renza. “Whereas Amgen has a strong analysis and growth engine, additionally they must diversify by acquisition.”

Within the case of Horizon, its two dominant medication are solely used to deal with a small proportion of the inhabitants, making it extra cost-efficient for Amgen to purchase the businesses than develop the medication by itself.

“There’s an inherent danger to drug growth, even when replicating related drug trials and there are much more regulatory hurdles,” Renza mentioned.

There’s additionally the difficulty of patent safety. Remedies that obtain orphan drug designation can be given seven years of market exclusivity after approval.

With a variety of Amgen’s drug patents set to run out, the 2 Horizon therapies probably supply a big income stream unencumbered by competitors.

“In 2022, Amgen’s income base was over $26 billion in a number of therapeutic areas, together with hematology, oncology and irritation,” Renza mentioned. “The Horizon medication will give them traction in areas that they don’t at present draw income.”

The truth is, he mentioned whereas Tepezza introduced in $2 billion in income in 2022, analysts are predicting that quantity might attain almost $4 billion by the late 2020s and Krystexxa, which yielded $700 million final yr, might rise to as a lot as $2 billion in the identical time interval.


Katie Funk, a shareholder at regulation agency Baker Donelson, mentioned the lawsuit represents a departure from latest antitrust actions.

“For the previous 30 years, the FTC has reviewed transactions between pharmaceutical corporations for horizontal overlaps, which means they each had a product available on the market or below growth that handled the identical situation,” mentioned Funk, a former FTC legal professional who relies out of the agency’s D.C. workplace.

“What makes this case totally different is that they don’t supply competing merchandise,” Funk added. “The truth is, Horizon is at present the one firm providing medication that deal with these two circumstances, and so, for now, it already has a authorized monopoly.”

As a substitute, the FTC’s strategy follows a concept used within the Sixties by the company and upheld by the U.S. Supreme Courtroom below Chief Justice Earl Warren to dam a conglomerate merger between Procter & Gamble and Clorox.

“In contrast to the current day, the Sixties Warren courtroom was a really liberal courtroom, which took an expansive view of antitrust regulation,” mentioned College of the Pacific McGeorge Faculty of Regulation Professor Frank Gevurtz. “The attitudes held by the excessive courtroom have been a lot totally different than they’re now, however below Biden Administration appointee FTC Chair Lina Kahn they’re being revived.

“The idea within the Amgen case is actually that the mega big would use its bundled arsenal to offer packaged discounting or rebates to insurance coverage corporations to offer Horizon’s two monopoly medication a extra favorable place, thereby damaging competitors within the adjoining market, very similar to Procter & Gamble would use its promoting benefit to additional entrench the monopoly place of Clorox bleach,” Gevurtz added.

USC Marshall Faculty of Enterprise Professor of Administration and Group Peer Fiss mentioned the staunch antitrust stance is a part of an general pattern that started as a response to the rising energy of tech giants like Fb and Google.

“It has been pushed by FTC Chair Lina Khan, a rising star within the antitrust area who has pushed for extra scrutiny of main tech gamers and has pursued a way more aggressive coverage agenda,” mentioned Fiss.

“The tech trade has been mobilizing towards these insurance policies for some time, lawyering up and lobbying lawmakers to struggle towards the rising tide to dismantle their energy,” Fiss added. “I believe that with this motion by the FTC, we are going to see related strikes among the many biotech and pharmaceutical industries.”

What’s subsequent?

Whereas an Amgen spokesperson has expressed confidence the deal will shut, proper now its destiny stays in limbo.

A listening to on whether or not to grant the FTC’s request for a preliminary injunction is about for Sept. 11 earlier than U.S. District Decide John F. Kness in Chicago. The choose has mentioned it might doubtless be 4 weeks earlier than he decides.

Amgen has agreed to not shut the deal earlier than Oct. 31 or the second enterprise day after the courtroom guidelines on the matter.

If the FTC prevails and the events proceed their struggle, the matter would transfer to a trial on the deserves earlier than an administrative choose on the FTC.

Ought to the FTC lose its bid for a preliminary injunction, it might file an enchantment with the seventh Circuit. In both case, an enchantment might drag the case out till subsequent yr or past.

The deal did have an preliminary termination date, which has mechanically been prolonged.

“The drop-dead or exterior date is Dec. 12,” mentioned Funk. “The date could be prolonged, however it might require an modification to the settlement, and will imply extra negotiations between the events.”

The settlement between the businesses requires Horizon to obtain a charge of $974,415,054 or about 3.5% of the transaction worth if the deal doesn’t shut because of antitrust causes, mentioned Funk.

Whereas Gevurtz and different specialists don’t imagine the FTC will prevail ultimately, he mentioned if the idea is profitable, it could possibly be used to attempt to block acquisitions involving companies exterior the biotech and pharmaceutical industries.

“This concept supplies the potential to attempt to cease different offers down the highway each time giant corporations attempt to merge with smaller companies having slim monopolies and the result’s to offer the smaller firm with some additional advertising and marketing benefit,” mentioned Gevurtz.

Though Horizon’s revolutionary therapeutics proved engaging to Amgen, ought to the deal disintegrate, Renza mentioned the corporate would doubtless set its sights on one other enterprise that might enable it to enhance its present drug arsenal, however it might have a chilling impact on the present means during which it does enterprise.

“Amgen’s urge for food to develop received’t go away, however it may search to take action by single smaller transactions that don’t appeal to the identical consideration as this one has gotten from the FTC,” mentioned Renza. “This technique would make it harder for Amgen to broaden its drug portfolio since it might have to take action one small transaction at a time.”

With the affect already sending shockwaves by the biotech and pharmaceutical industries, analysts are paying shut consideration to different proposed acquisitions.

“The FTC case, even when most see it as unlikely to succeed, will hold buyers on the fringe of their seats this yr given how essential M&A offers are to biotech,” mentioned Renza.