As Big Pharma companies face growing competitive pressures for their existing businesses, they’ve been increasingly drawn to rare disease M&A. That trend appears to be intact with some new dealmaking news late Tuesday.
The latest potential deal? Rare disease drug maker Horizon Therapeutics said it has drawn buyout interest from three pharma juggernauts: Amgen, Johnson & Johnson’s Janssen and Sanofi.
Horizon on Tuesday confirmed it’s in “highly preliminary” discussions with the three companies, following an earlier report from The Wall Street Journal on buyout talks. A deal may not happen in the end, and there’s no guarantee that a potential suitor would aim to take over the entire company, Horizon cautioned.
By making the takeover talks public, Horizon is essentially forcing the three large pharmas’ hands. Under Irish securities rules, Amgen, J&J and Sanofi have until Jan. 10, 2023, to announce whether they intend to make an offer, Dublin-headquartered Horizon said.
An acquisition of Horizon would give the relatively quiet biopharma M&A space something to cheer about. Nasdaq-listed Horizon was trading at around $79 per share Tuesday, giving it a market cap of nearly $18 billion as of market close. And the announcement shot up its share price by 30% in after-hours trading.
For context, the biopharma industry’s largest acquisition involving a drugmaker so far this year was Pfizer’s $11.6 billion purchase of migraine drug developer Biohaven Pharmaceutical. The two largest biopharma M&A deals last year, CSL’s takeover of Vifor Pharma and Merck & Co.’s Acceleron buy, were both worth slightly less than $12 billion.
Earlier this year, Merck was reportedly eyeing a $40 billion takeover of Seattle cancer specialist Seagen, but those talks seem to have cooled.
In a Wednseday note, Cowen analysts said they believe a transaction will occur, and that a minimum per-share price above Horizon’s all-time high of about $120 and potentially closer to Cowen’s price target of $140 would be reasonable.
Horizon has bolstered its own position in rare diseases thanks to M&A. In the biopharma industry’s seventh-largest acquisition last year, Horizon scooped up AstraZeneca spinout Viela Bio and got its hands on Uplizna, which is approved by the FDA to treat the rare disease neuromyelitis optica spectrum disorder and is in testing for other autoimmune disorders such as the rare neuromuscular junction disorder myasthenia gravis. Horizon also got orphan drugs Ravicti and Buphenyl through its $1.1 billion buyout of Hyperion Therapeutics in 2015.
Following the Viela deal, Horizon last year laid out an ambitious plan to reach peak annual sales of $10 billion, compared with $3.4 billion in 2021. Earlier this month, the company raised its peak sales projections for thyroid eye disease med Tepezza by $500 million to greater than $4 billion. The company also boosted its U.S. peak sales expectation for gout drug Krystexxa by $500 million to more than $1.5 billion.
Any interest for Horizon would likely center around Tepezza, and Krystexxa and Uplizna to a lesser extent, Cowen analysts figured.
Rare disease M&A has gained traction among Big Pharma companies in recent years. AstraZeneca in late 2020 shelled out $39 billion to buy Alexion, which sells competitor drugs to Horizon’s offerings. The crown jewel of Merck’s Acceleron deal was sotatercept, which is designed for pulmonary arterial hypertension, a rare cardiovascular disease.
Amgen, one of the potential suitors of Horizon, just acquired ChemoCentryx for $3.7 billion and obtained Tavneos, which is FDA-approved to treat a rare autoimmune disease called anti-neutrophil cytoplasmic antibody-associated vasculitis. Buying Horizon would once again boost Amgen’s autoimmune and kidney disease position as sales in some of its existing businesses languish.
For J&J, the Big Pharma company is in the process of spinning off its consumer health franchise and is holding a major M&A war chest. J&J reportedly lost to Pfizer in a recent bid to acquire sickle cell disease specialist Global Blood Therapeutics in another rare-disease-themed M&A deal. So the company could make a play for Horizon instead.
As for Sanofi, the French pharma is a well-established rare disease player since its $20 billion buyout of Genzyme more than a decade ago. But some of Sanofi’s recent M&A moves haven’t panned out under CEO Paul Hudson’s watch.
Sanofi recently started rethinking IL-2 candidate SAR444245—which was the centerpiece of its $2.5 billion takeover of Synthorx—after seeing lackluster efficacy data. In terms of Sanofi’s questionable $3.7 billion acquisition of Principia Biopharma, one of the company’s BTK inhibitors, rilzabrutinib, failed a phase 3 rare autoimmune skin disease trial last year. And, earlier this year, its second BTK candidate, tolebrutinib, was slapped with a partial FDA clinical hold in multiple sclerosis and myasthenia gravis because of safety concerns. So, Sanofi might be incentivized to turn to Horizon to make up for the setbacks.
Editor's Note: The story has been updated with additional comments from a Cowen note.