By Diane Bartz and Leroy Leo
WASHINGTON (Reuters) -The U.S. Federal Trade Commission said on Tuesday it has filed a lawsuit to stop Amgen Inc (NASDAQ:AMGN)'s $27.8 billion acquisition of Horizon Therapeutics (NASDAQ:HZNP) Plc in a rare move to block a large pharmaceutical deal.
The FTC said it opposed the deal because of concern that Amgen would leverage its big selling drugs to pressure insurance companies and pharmacy benefit managers to give favorable terms for Horizon's two key products - the fast-growing thyroid eye disease treatment Tepezza and gout drug Krystexxa.
The FTC decision to stop this acquisition marks a change. Previously, the agency flagged therapeutic overlaps in the companies and waved the deals through after requiring one of the medicines to be divested.
The case was assigned to Judge John Kness, who was nominated to the court by President Donald Trump. It was filed in federal court in Chicago.
Amgen said in a statement it was disappointed by the FTC decision and that it believed it had "overwhelmingly demonstrated" that the deal had no legitimate competitive issues. The California-based biotech, which had hoped to close the deal in the first half of this year, said it would work with the court to complete the transaction by mid-December.
The suit drove Horizon's stock price down 14% to close at $96.34, while Amgen shares fell 2.4% to $227.88. It also pushed down shares of biotech companies Seagen Inc and Prometheus Biosciences, which recently struck deals to be bought by major drugmakers Pfizer Inc (NYSE:PFE) and Merck & Co, respectively.
"The FTC has signaled its determination to scrutinize pharma mergers more carefully," former FTC Chairman William Kovacic said in an email. He said the commission's decision to try to block the deal, rather than pursue a settlement, suggests the FTC does not believe previous settlements adequately fixed the perceived competitive issues.
Amgen announced plans to buy Horizon in December, saying that its rare disease drugs would offer it some protection from the drug pricing provisions of the Inflation Reduction Act, which are aimed at drugs most widely used by the government's Medicare health plan.
One month later, Democratic Senator Elizabeth Warren wrote to FTC Chair Lina Khan asking her to scrutinize the deal for antitrust violations and to oppose it if the agency found them.
In the letter, Warren said Tepezza costs nearly $433,000 per course and pointed out both companies' histories of raising prices on their drugs.
Amgen sees revenue from the Horizon medicines helping to offset increased competition that has eroded sales of its blockbuster rheumatoid arthritis drug Enbrel. Other key drugs in Amgen's product portfolio, such as psoriasis treatment Otezla, face the loss of patent protections over the next few years.
The FTC, which currently has three Democratic commissioners, voted 3-0 to approve the challenge to the Amgen-Horizon deal.
BMO Capital Markets analyst Evan Seigerman said he believes the FTC's arguments are "overly broad and at best hypothetical," and expects the deal to eventually close. Still, he said Pfizer's $43 billion takeover of Seagen could face a similar challenge.Jefferies analyst Michael Yee said drugmakers may change how they view M&A targets based on this FTC case to emphasize smaller companies or those with products still in clinical trials.
Shares of some companies viewed as potential acquisition targets like Sarepta Therapeutics (NASDAQ:SRPT) and BioMarin Pharmaceutical (NASDAQ:BMRN) closed down more than 5% and 3%, respectively.
The last major pharmaceutical deal approved by the FTC was AstraZeneca (NASDAQ:AZN)'s $39 billion acquisition of Alexion (NASDAQ:ALXN) Pharma in April 2021, about two months before Khan was appointed by the Biden administration.