FTC Moves to Block Amgen’s $27.8 Billion Deal for Horizon Therapeutics

Agency seeks injunction in federal court to prevent deal for rare-disease drugmaker from closing

The Federal Trade Commission said it is seeking to block Amgen’s $27.8 billion acquisition of Horizon Therapeutics, in a rare effort by antitrust enforcers to prevent a merger of pharmaceutical companies.

The FTC on Tuesday filed a lawsuit in federal court seeking an injunction that would prevent the deal from closing. A federal judge would need to approve the injunction. That is part of a two-step legal process the agency typically uses to prevent mergers it believes are illegal.

Under Chair Lina Khan, the FTC has taken a stricter stance on deals generally, saying antitrust enforcers in the past several decades shied away from challenging many deals, allowing firms in technology, healthcare and other industries to amass excessive market power.

Drug companies facing antitrust scrutiny are often able to satisfy the agency and complete their deals by agreeing to divest themselves of products that are the source of the anticompetitive concerns, said Eric Grannon, an antitrust partner at White & Case. The new lawsuit, however, could signal a tougher approach for a sector that has usually avoided the harshest FTC action, according to analysts and lawyers.

“The commission has been foreshadowing its interest in bringing a case involving pharma for quite a while now,” said William Kovacic, a professor at George Washington University Law School who was the FTC’s chairman from 2008 to 2009.

The agency’s aggressiveness could chill company deal making, though some antitrust experts say some companies will bet that courts will take a dim view of the agency’s theories of harm.

“This is going to be an uphill slog for the FTC,” Mr. Grannon said. “The FTC is asking some judge to be the first at least in potentially decades to enjoin a merger between pharma companies, which would give any reasonable judge at least a little pause.”

Amgen shares were down more than 2% on Tuesday, while Horizon Therapeutics shares fell more than 14%.

The FTC said the deal would allow Amgen to “entrench the monopoly positions” of Horizon’s eye and gout drugs. The agency said that those treatments don’t face any competition today and that Amgen would have a strong incentive to prevent any potential rivals from introducing similar drugs.

“The FTC won’t hesitate to challenge mergers that enable pharmaceutical conglomerates to entrench their monopolies at the expense of consumers and fair competition,” FTC Bureau of Competition Director Holly Vedova said.

The argument that the combination would limit potential future competition underlies some other recent FTC merger challenges and represents a novel theory for challenging deals, said Taylor Owings, an antitrust partner at Baker Botts. Among the claims behind the theory, Ms. Owings said, was that other drugs will emerge to compete with Horizon’s products, and that Amgen would smother those rivals with illegal and anticompetitive tactics.

Amgen said it was disappointed by the FTC’s decision but doesn’t believe a merger presents any competitive issues and will work to close the deal by mid-December. Horizon said the deal would accelerate the availability of rare-disease drugs worldwide.

Under the Biden administration, the FTC and Justice Department have challenged more corporate deals, including some that didn’t involve mergers of rivals. The FTC has sued to stop Microsoft from acquiring the videogame maker Activision Blizzard, a deal that European Commission authorities cleared Monday. The agency has rejected Illumina’s proposed purchase of an outstanding stake in the cancer-test maker Grail.

The FTC tried unsuccessfully to block Facebook owner Meta Platforms from buying a virtual-reality game maker, Within Unlimited. The FTC brought that case even though Meta didn’t compete within the virtual-reality-game market that was at issue. A federal judge declined to issue an injunction blocking the deal, and the FTC later abandoned a related lawsuit against Meta that had been proceeding in the agency’s in-house court.

Antitrust enforcers are conducting a broad investigation of CVS Caremark, Express Scripts and other large pharmacy-benefits managers over what impact their business models have on the accessibility and affordability of prescription drugs.

An acquisition of Horizon would boost revenue growth at Amgen, of Thousand Oaks, Calif., one of the pioneering biotechnology companies. Its sales have sagged in the midst of greater competition for its older drugs, including its blockbuster immune-disease treatment, Enbrel.

Dublin-based Horizon makes medicines for rare diseases that often command high prices and face less competition than mass-market products. Horizon had sales of $3.6 billion last year, and those are projected to rise to $5.3 billion in 2026, according to analysts polled by FactSet.

In challenging the deal, the FTC cited Horizon’s Tepezza drug for thyroid eye disease and its gout treatment, Krystexxa. The agency said a six-month supply of Tepezza is priced at $350,000 and a year of Krystexxa is priced at $650,000.

The FTC said Amgen could harm competition by offering higher rebates to the companies that manage drug benefits in exchange for giving Tepezza and Krystexxa a preferred position on lists of covered medicines, a practice the law-enforcement agency called “cross-market bundling.”

Amgen dismissed the FTC’s bundling concerns as speculative and said it had told the FTC it wouldn’t bundle the Horizon products. “We are unaware of any prior acquisition that has been blocked under a bundling theory,” the company added. Horizon also said it doesn’t plan to bundle its rare-disease medicines.

The FTC staff has examined bundling concerns for years, while smaller companies have sometimes used them to support private lawsuits against their dominant rivals, Mr. Kovacic said.

A federal appeals court in 2003 found that the manufacturer 3M had illegally monopolized the transparent-tape market by bundling its products. Bundling cases “have worked, and I assume that is part of the logic of the case that the FTC is developing in this instance,” he added.

The rival Regeneron Pharmaceuticals has accused Amgen, in a civil antitrust complaint filed in a federal court in Delaware, of using bundling to pressure pharmacy-benefit managers, the middlemen who oversee prescription-drug benefits for employers and insurers, to stop covering a Regeneron cholesterol drug in exchange for greater discounts on Amgen’s competing cholesterol drug and other products.

Amgen has denied the allegations in the suit.

Amgen has said it targeted Horizon because it has expertise in manufacturing the kind of complex biological drugs that are made of living cells and because Amgen has a global sales force that can expand Horizon’s reach to more patients in the U.S. and in international markets.

Amgen’s and Horizon’s product portfolios have little of the kind of overlap in disease areas that would traditionally be seen as anticompetitive, analysts said.

If the FTC were successful in blocking the deal, analysts said it could damp acquisitions in the biotech industry, where the potential of takeovers by big companies such as Amgen are a key attraction for investors.

The FTC challenge of the merger “represents a new and unprecedented challenge to biotech investing,” Piper Sandler analyst Christopher Raymond said in a note to clients. “With essentially zero commercial overlap, this deal would seem to be a slam dunk under long-established antitrust considerations.”