Horizon Therapeutics plunges as FTC lawsuit increases risk to Amgen deal (update)
JHVEPhoto/iStock Editorial via Getty Images
Update 4:18pm: Updates share prices.
Horizon Therapeutics (NASDAQ:HZNP) plummeted 14% as the Federal Trade Commission filed suit to challenge the company's $28 billion sale to Amgen (NASDAQ:AMGN). Amgen (AMGN) ticked down 2.4%
The FTC is filing a lawsuit to block the combination. Amgen (AMGN) agreed to acquire Horizon Therapeutics (HZNP) for $116.50 a share in cash in December, valuing the Ireland-based biotech at nearly $27.8 billion.
If the deal were to fall apart, Horizon (HZNP) stock may fall to $80-$90, Wells Fargo analyst Mohit Bansal wrote in a note on Tuesday.
"While AMGN and HZNP marketed products do not overlap, recent FTC scrutiny seems to be pushing it a bit further than traditional overlapping markets and investigating if a single player is becoming stronger," Bansal wrote. 
Amgen (AMGN) shareholders don't like the deal in the first place, according to Bansal, so they may be "indifferent" to a deal break. Bansal sees Amgen fair value of $255 a share without Horizon (HZNP). 
An Amgen spokesperson told Seeking Alpha in an email that the company is not aware of any decision made by the Commission. The biotech firm will provide "any appropriate updates when we have more information." Horizon (NASDAQ:HZNP) didn't immediately respond to Seeking Alpha email request for comment after normal business hours.
RBC analyst Gregory Renza doesn't see an FTC lawsuit as necessarily a deal killer and sees path to getting a deal done. 
"The reports of the potential FTC action, at first pass do not look insurmountable, citing concerns on the eczema and lupus categories where both parties have programs under development though no commercial muscle," Bansal wrote in a note on Monday. "Based on the limited information available, we believe parties willing to engage could find a way to resolution given the small areas of development relative to the larger portfolios."
Earlier this month, a UBS analyst wrote that Horizon Therapeutics (HZNP) standalone value is in the $65-$70 a share range, though the deal was likely to gain regulatory approval. 
Jefferies analyst Akash Tewari sees Horizon (HZNP) could trade in low to mid $70s a share on a potential deal break. 
"Weâd be buyers on this dip pending confirmation from AMGN/HZNP that both parties are willing to litigate any FTC challenge in court (case could take 6m+)," Tewari wrote in a note on Tuesday.
Jefferies analyst Michael Yee expects that the FTC lawsuit could cause a delay of 3 to 5+ months in the deal and there will be more clarity in Fall 2023. 
"We believe AMGN would not walk from the deal and would be prepared to defend the merits of the case in court," Yee wrote in a note on Monday. "We presume AMGN will trade up modestly but then the uncertainty and timing of this process to all play out into the H2 may keep AMGN more range-bound until there is greater clarity later in 2023, and investors will bid AMGN back up because the deal is more likely to close given lack of merit."
Seagen (SGEN) the cancer-focused biotech company that Pfizer (PFE) agreed to buy in March for $43 billion, fell 6% in premarket trading, as investor are likely concerned that regulators could also look to block the megadeal. 
"This development could put ongoing deals and future big deals in question - If this scrutiny is indeed related to stopping bigger deals, we suspect it could make investors jittery around PFE-SGEN," Bansal wrote.
More on Horizon/Amgen

Amgen: Questioning The Horizon Therapeutics Acquisition
Horizon Therapeutics: Attractive 7.16% Upside To Amgen Deal
Amgen's acquisition of Horizon Therapeutics on track to close in 1H - report