In a significant development, the Federal Trade Commission (FTC) has given the green light to Amgen‘s $27.8 billion acquisition of Horizon Therapeutics under a settlement agreement. This decision has far-reaching consequences for various players in the pharmaceutical industry. Wall Street analysts, while relieved by the FTC’s move, are also speculating on its broader implications. In this article, we delve into the details of this acquisition and its potential impact on the pharmaceutical sector.
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Amgen Settlement Eases Regulatory Concerns
The FTC’s decision to settle the Amgen-Horizon deal is seen as a positive sign for the pharmaceutical M&A landscape. Analysts believe that this move will likely ease regulatory headwinds for other pending deals, including Pfizer’s proposed $43 billion acquisition of cancer drug developer Seagen. According to William Blair analyst Matt Phipps, this settlement significantly mitigates regulatory challenges, and the Pfizer-Seagen deal is expected to close by the end of the year or early 2024. Truist analyst Robyn Karnauskas also views the settlement as a positive development for mergers and acquisitions in the pharmaceutical sector.
FTC’s Vigilance and Potential Implications
While the settlement agreement may signal a more cooperative stance from the FTC, some analysts and experts caution against complacency. They believe that the FTC could still scrutinize other large buyouts in the industry and that the restrictions imposed on Amgen might set a precedent for future deals. Nathan Ray, a partner at West Monroe overseeing health-care M&A, suggests that while this development may assist other companies in evaluations, it also hints at the FTC’s increased activity in the sector.
Changing Landscape under the Biden Administration
The Biden administration has taken a more proactive approach in scrutinizing acquisitions across industries, departing from the previous government’s light-touch approach. The FTC’s legal challenge against Amgen marked its first such challenge to a pharmaceutical buyout in 14 years. This action coincides with a rebound in M&A activity in the pharmaceutical industry, with companies spending over $80 billion on M&A in the first half of the year, making 2023 potentially the most active year for deals since 2019.
Details of the Settlement Agreement
The settlement agreement places specific restrictions on Amgen, such as prohibiting the bundling of its products with Horizon’s blockbuster drugs. This practice involves offering rebates or discounts on existing products to influence insurers and pharmacy benefit managers to favor Horizon products. BMO Capital Markets analyst Evan Seigerman believes these conditions are unlikely to affect Amgen significantly, as the company has no intention of bundling products. However, some analysts argue that these restrictions could set a precedent for future deals.
FTC’s Approach and Industry Impact
The FTC appears inclined to find narrow reasons for challenging deals, even when they do not appear to create anti-competitive situations. In the case of the Amgen-Horizon deal, many analysts agree that it does not reduce competition due to the vastly different drug portfolios of the two companies. Nonetheless, the settlement agreement could prompt more careful consideration of M&A activities within the pharmaceutical industry, according to Wells Fargo analysts.
FTC’s Commitment to Antitrust Scrutiny
FTC Chair Lina Khan has made it clear that the agency will not ease its antitrust scrutiny in the pharmaceutical industry. Khan emphasized the FTC’s commitment to challenging unlawful practices that raise drug prices, hinder access, impede innovation, or harm patients.
Takeaway
The FTC’s decision to allow Amgen’s acquisition of Horizon Therapeutics under a settlement agreement is a significant development with implications for the pharmaceutical industry. While it eases regulatory concerns for some pending deals, it also raises questions about the FTC’s future approach and the impact of similar restrictions on other acquisitions. This dynamic landscape underscores the need for pharmaceutical companies to carefully navigate the evolving M&A environment.
