Amgen, maker of Enbrel, to pick up Celgene's Otezla for $13.4B. Will FTC hit back?

amgen
Amgen is paying $13.4 billion to buy Celgene's Otezla, clearing the way for Bristol-Myers Squibb's $74 billion buyout. (Amgen)

Looks like Amgen might not be buying Alexion Pharmaceuticals after all. Instead, it’s beefing up in psoriasis, where it already sells blockbuster TNF inhibitor Enbrel.

Amgen Monday said it will take in Celgene’s Otezla for $13.4 billion in cash, a purchase that could help Bristol-Myers Squibb move along with its planned acquisition of Celgene for $74 billion, per an agreement with U.S. antitrust authorities.

The dollar amount easily dwarfs some recent biopharma deals for entire companies, showing enthusiasm over the immunology and inflammatory markets, led by the world’s best-selling drug and Enbrel rival, Humira. And it’s significantly above the price tag analysts have previously estimated for Otezla, suggesting an intense bidding process for the fast-growing psoriasis drug whose second-quarter sales increased by 31% year over year, to $493 million.

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“Otezla represents an exciting opportunity to strengthen Amgen's presence in inflammation and continue Amgen's geographic expansion,” Amgen CEO Robert Bradway said in a statement.

Otezla is an attractive product that, while still in the early stages of its life cycle, is already raking in blockbuster sales. But Bristol was forced to sell Otezla to win the U.S. Federal Trade Commission's (FTC's) clearance simply because it overlaps with BMS’ own investigational TYK-2 inhibitor, BMS-986165. How will the anti-competition watchdog allow two marketed blockbuster drugs in the same indications to be housed under the same roof?

Amgen isn't worried. “We have a high degree of confidence, but we want to respect the FTC’s process, and they’ll review it on the merits,” Bradway said on the call. “You can probably also conclude that the seller feels we’re a strong buyer and an appropriate buyer of Otezla.”

At least J.P.Morgan analyst Cory Kasimov's team shares Amgen's optimism because “BMS/Celgene would ultimately sell this asset to a buyer that they felt confident in reducing additional FTC scrutiny,” it wrote in a Monday note.

RELATED: In a crowded psoriasis field, who could nab Celgene's Otezla—and at what price?

The company expects the drug could enjoy at least low double-digit sales growth on average over the next five years. The Street’s consensus currently has it reaching $2.5 billion in peak sales before presumably going off patent in the U.S. in 2028. At that rate, assuming the deal closes as expected by the end of 2019, Amgen will at least be able to get its investment back in full by around 2024.

Based on that estimate, analysts from RBC Capital Markets, Jefferies and Credit Suisse had previously expected a deal could reach $10 billion, tops. Besides Amgen, several immunology players were suspected as potential buyers, including Cosentyx marketer Novartis, Tremfya seller Johnson & Johnson, AbbVie, Eli Lilly and Gilead Sciences, which is hoping to nab an approval for oral JAK inhibitor filgotinib soon. But now, Amgen has emerged as the winner, going well past the $10 billion mark.

Still, Jefferies analyst Michael Yee called it a “smart deal” for Amgen in an investor note Monday. Even though the price went up in a competitive process,  Amgen is an excellent buyer of Otezla, as the Enbrel salesforce could help grow it around the world, he said.

Currently, Otezla is approved in three indications in the U.S. including moderate-to-severe plaque psoriasis, psoriatic arthritis and its most recent addition, oral ulcers associated with Behçet's disease. Several ongoing clinical programs could lead to additional label expansions. These include mild to moderate psoriasis, scalp and genital psoriasis as well as various pediatric indications, Amgen’s R&D chief David Reese said on the call.

“We think more to come on the development front and feel very good in terms of clinical profile and the likelihood of success in those indications,” he said.

As for its geographic expansion, Bradway said Otezla “fits particularly well with some of the large European markets,” both with the Big Biotech's ongoing launch of Amgevita, a Humira biosimilar, and its existing sales capabilities.

Last week, rumors resurfaced that Amgen was looking to buy Alexion, which makes $3 billion-a-year drug Soliris to treat rare blood and neurological diseases, as well as its follow-up product, Ultomiris. Analysts immediately rallied behind that deal because it, like Otezla, could immediately add some near-term revenue growth for Amgen, which is suffering under copycat competition to drugs including Neulasta and Sensipar.

Editor's Note: This story has been updated with comments from analysts from Jefferies and J.P.Morgan.

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