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 in 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.
Horizon shares closed up 15% on Monday at $112.36. 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 shares dipped less than 1% to close at $276.78.
With the deal, Amgen gains two fast-growing drugs, the thyroid eye disease treatment Tepezza and gout treatment Krystexxa. Amgen hopes they can act as a bulwark against rising competition for its blockbuster arthritis drug Enbrel and as other key drugs in its portfolio, such as psoriasis therapy Otezla, face loss of patents over the next few years.
Both Horizon medicines have an orphan drug designation, a status granted by the U.S. Food and Drug Administration to encourage development of drugs for rare conditions that comes with a market exclusivity period if the drug is approved.
Orphan status also means they would likely not be among the drugs for which the U.S. government's Medicare program can negotiate lower drug prices under the Biden Administration's Inflation Reduction Act (IRA).
"We liked this company, even before the IRA," Murdo Gordon, Amgen's head of global commercial operations, said in an interview.
"Given the IRA, the strategic importance of being in these kinds of disease areas with biologics primarily, and with products that have low Medicare exposure and orphan designation, makes it even more attractive," he added.
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)
Amgen said it 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.
Tepezza, Horizon's largest selling drug, saw sales double to $1.66 billion in 2021 from a year earlier.
Analysts forecast Tepezza sales reaching $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 gout treatment Krystexxa brought in sales of $565.5 million last year. They are forecast to reach $1.36 billion by 2028.
"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 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.