Amgen dives deeper into rare disease drugs with $27.8 billion Horizon deal

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By Manas Mishra and Bhanvi Satija

(Reuters) -Amgen Inc on Monday agreed to buy Horizon Therapeutics (NASDAQ:HZNP) Plc in a deal valued at $27.8 billion, fortifying its rare diseases portfolio amid pressure on its top-selling products and marking the biggest buyout in the sector this year.

The company will pay $116.50 in cash, a premium of nearly 20% to the stock's last close, for each Horizon share held.

Horizon's shares jumped 14.5% in early trading. They had climbed 23.5% through Friday since the company disclosed in late November it was in preliminary talks with Amgen (NASDAQ:AMGN), Sanofi (NASDAQ:SNY) and Johnson & Johnson (NYSE:JNJ) for potential offers.

Amgen gains several approved drugs through the deal, a bulwark against rising competition for its blockbuster arthritis drug, Enbrel, from newer treatments. Enbrel and other key drugs in its portfolio, such as psoriasis therapy Otezla, also face loss of patents over the next few years.

"The offer clearly brings in a number of growing assets for Amgen," said William Blair analyst Matt Phipps.

"However, the deal comes with significant debt," Phipps said, adding that the acquisition stretches Amgen's net debt-to-core-earnings ratio.

Amgen plans to finance the deal through debt and cash, and has entered into a $28.5 billion credit agreement with Citibank and Bank of America (NYSE:BAC).

The company's shares fell marginally to $277.86.

Amgen expects the deal to close in the first half of next year and add to earnings from 2024. It does not anticipate any "overlaps of concern to regulators."

Sales of Amgen's Enbrel tumbled 14% in the latest reported quarter to $1.1 billion, extending a run of downbeat performances.

Meanwhile, sales of thyroid eye disease treatment Tepezza -- Horizon's largest selling drug -- doubled to $1.66 billion in 2021 from a year earlier.

Analysts project Tepezza sales to hit $3.85 billion in 2028, while Enbrel sales are expected to fall to $1.89 billion during the same period, according to Refinitiv data.

Horizon's other major drug, Krystexxa, used to treat gout not controlled by other medicines, brought in sales of $565.5 million. Sales of the drug are pegged to reach $1.36 billion by 2028.

Amgen is testing a closely watched obesity drug in early trials as it seeks to tap a potential multibillion dollar market that has excited biotech investors.

The Horizon bid follows Amgen's $3.7 billion deal in August for rare blood vessel inflammation treatment maker ChemoCentryx (NASDAQ:CCXI) Inc.

The offer values Horizon at $27.8 billion on a fully diluted basis, according to the company, which includes ordinary shares to be vested. Based on Reuters calculations, it values Horizon at about $26 billion and gives Horizon a $28.3 billion valuation, including debt.