Amgen Stock Drops Despite Its $27.8 Billion Horizon Agreement to Develop Rare Disease Drugs

Amgen Stock

Amgen (NASDAQ:AMGN)

On Monday, Amgen Inc. said that it has agreed to acquire Horizon Therapeutics (NASDAQ:HZNP) Plc in a transaction valued at $27.8 billion, strengthening its rare illnesses portfolio in the face of pressure on its top-selling drugs. Despite it, Amgen stock declined. 

If you own shares in Horizon, the corporation will pay you $116.50 in cash for each one. This represents a premium of roughly 20% over the stock’s previous close.

In the first few minutes of trade, shares of Horizon soared 14.5%. 

Since the business announced in late November that it was in early negotiations with Amgen (NASDAQ:AMGN), Sanofi (NASDAQ:SNY), and Johnson & Johnson (NYSE:JNJ), the stock price has increased by 23.5% through Friday.

Due to the increased competition for its best-selling arthritis medicine, Enbrel, Amgen will benefit from acquiring many authorized pharmaceuticals. 

Many of its essential pharmaceuticals, like the psoriasis treatment Otezla and the autoimmune disease drug Enbrel, will lose their patent protection in the coming years.

According to William Blair analyst Matt Phipps, Amgen acquires a variety of promising expansion assets.

Phipps noted that the purchase increased Amgen’s net debt-to-core earnings ratio and noted that “the agreement comes with a hefty debt.”

Amgen has engaged in a $28.5 billion credit arrangement with Citibank and Bank of America to finance the purchase (NYSE:BAC).

Amgen stock price dropped to $277.86, a slight decline.

The company anticipates the transaction to completion in the first half of 2019 and to contribute to profits beginning in 2024. 

They expect there will be no “overlapping of concern to regulators.”

Sales of Enbrel, manufactured by Amgen, fell by 14% year over year to $1.1 billion in the most recent reported quarter.

Horizon’s top-selling medicine, Tepezza, used to treat thyroid eye conditions, had its sales increase by 100% in 2021, reaching $1.66 billion.

Tepezza is forecast to reach $3.85 billion in 2028, while sales of Enbrel are predicted to plummet to $1.89 billion over the same year, as shown by statistics from Refinitiv.

Krystexxa, Horizon’s second significant drug, treats gout that has not responded to previous medications. It generated $565.5 million in revenue. 

The drug’s sales are expected to reach $1.36 billion by 2028.

Biotech investors are enthusiastic about the potential multibillion-dollar market that Amgen hopes to tap into with its widely studied obesity medicine now in early studies.

The Horizon offers followed Amgen’s $3.7 billion acquisition of ChemoCentryx (NASDAQ:CCXI) Inc. in August.

According to Horizon, with the vested ordinary shares included, the offer values the firm at $27.8 billion on a fully diluted basis. 

Reuters estimates that Horizon is worth $26 billion, making its total valuation with debt equal to $28.3 billion.

Featured Image – Pexels © Artem Podrez

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