Amgen secured a bridge fund to facilitate the purchase joining AT&T and Broadcom and will fund the purchase with a bridge credit facility from Bank of America and Citigroup
Amgen set to buy Horizon Therapeutics for $27.8 billion in its largest-ever acquisition arranging a $28.5 billion bridge credit facility. The company will pay $116.50 per share in cash for a premium of about 48%. Amgen is the maker of the Enbrel treatment for autoimmune ailments like ankylosing spondylitis and psoriasis. The therapies are used and tested in various indications after reaching the market.
Horizon receives most of its sales from Tepezza, which is the treatment for the autoimmune condition called thyroid eye disease. Amgen recently acquired another drug company ChemoCentryx. The deal becomes the biggest since AstraZeneca bought Alexion Pharmaceuticals for $39 billion in the year 2020. Amgen is struggling with the threat of impending diminished revenue as some of the firm’s product faces a loss of patent protection in the advancing years.
Amgen secured a bridge fund to facilitate the purchase joining AT&T and Broadcom and will fund the purchase with a bridge credit facility from Bank of America and Citigroup. Bridge loans provided by banks are usually restored with permanent financing in the bond market, which is then sold to institutional investors. This deal would be the second time this year that the banks have come together to fund and advise a large deal, following their work on Philip Morris International’s acquisition of Swedish Match. Amgen had almost $11.5 billion in cash and equivalents by the end of the third quarter.
A Strategic Deal
The deal is undoubtedly expensive for Amgen, but it would provide a potential sales boost to Amgen. Horizon will help to fill the revenue losses the company incurred in recent years and the acquisition will strengthen the firm’s various areas including development, marketing, and the manufacturing of biologic drugs. Horizon’s acquisition was not without any competition as several leading companies had eyed the Dublin-based biotech research firm, but the price shot up. Johnson & Johnson and Sanofi SA were also in the bid to buy the company.
Sanofi had mentioned that the transaction prices exceeded their value creation criteria. This is also because of the increased expectation of Horizon’s portfolio. Horizon recently raised the sales forecast of Tepezza and is expected to reach the peak of annual sales, bringing in more than $4 billion due to increased demand in the US.
The sales of Krystexxa, the gout drug are also increasing and have an expected value of $1.5 billion. “We’ve admired Horizon’s success for some time, and we’ve studied their business closely through time as well, and when presented with this opportunity, we were prepared to move quickly,” stated Amgen’s Chief Executive Officer.
Amgen’s biomanufacturing life-cycle management and immensity knowledge could help the company achieve more revenue earnings and potentially increase them. Since most of Horizon’s products are approved in the United States, Amgen could receive long-term growth and development. The company also informs that the purchase of Horizon is expected to increase earnings per share, on a non-GAAP basis expecting to start in the year 2024. It foresees $500 million in annual pre-tax cost savings by the end of the third fiscal year after the conclusion.
Thousand Oaks, California-based Amgen has far surpassed its rivals this year, with its stock rising 24% through Friday to a market value reaching $149 billion. The previous month, Amgen reported revenue and profit that exceeded analyst estimates as drugs had record quarterly sales and kept operating expenses in order. Horizon shares gained as much as 15% to $112, their highest intraday level since April. Amgen’s shares fell 1.5%.
