Amgen buys Horizon for $27.8 billion in bold step into the rare disease market

Amgen Inc buys pharmaceutical company Horizon Therapeutics in a multibillion-dollar deal, in hopes to capitalise on it's portfolio of drugs in the highly sort after rare disease market. 

With the purchase, Amgen solidifies it’s place in the rare disease market, gaining Horizon’s two fastest growing drugs, Tepezza and Krystexxa, for the treatment of thyroid eye disease and gout respectively. The new additions to Amgen’s portfolio secure its position in the market as they see stiff competition for their arthritic drug Enbrel, and as other drugs face losing their patents in the coming years. 

Both of these medicines from Horizon have already been granted an orphan drug designation from the US FDA, which encourages the development of novel drugs for rare diseases and also gives a period of exclusivity in the market once the drug is approved for use. 

Another advantage of orphan status for the drug company is that those drugs are unlikely to be affected by the negotiation for lower drug prices by the Medicare programme under the Inflation Reduction Act (IRA) imposed by the Biden Administration. 

Murdo Gordon, Amgen's Head of Global Commercial Operations, commented: "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." 

Amgen plans to subsidise the deal with a mixture of cash payments and balancing debt, with a $28.5 billion credit agreement with Citibank and Bank of America. 

The company are keeping a close eye on the drug market. Sales of their own Enbrel have fallen 14% in the last quarter to $1.1 billion, which they are hoping to counteract with the acquisition, with some of Horizon’s drugs doing well in the market. For example, Tepezza (from Horizon) doubled in sales from 2020 to reach $1.66 billion in 2021. Projected sales from Tepezza are expected to reach $3.85 billion by 2028.

Amgen’s Krystexxa hit $565.5 million in sales last year, and are forecast to hit $1.36 billion by 2028. 
"The offer clearly brings in a number of growing assets for Amgen," stated William Blair Analyst Matt Phipps.

"However, the deal comes with significant debt," Phipps added; the acquisition stretching Amgen's net debt-to-core-earnings ratio.

Amgen has been expanding it’s portfolio recently and not just in the acquisition of Horizon, but in August of this year they secured a deal for $3.7 billion for ChemoCentryx Inc, the maker of a rare blood vessel inflammation treatment. 

The company currently has an obesity drug in early stage clinical trials, peaking the interest of biotech investors as it teases entry to this multibillion-dollar market. 

Investors will be keenly watching Amgen progress and how they will handle this new investment in the coming years.