3. Amgen/Celgene's Otezla

amgen
Amgen's $13.4 billion offer price for Otezla far exceeded analysts' estimates, but some think the Enbrel maker can make the investment worthwhile. (Amgen)

Amgen/Celgene's Otezla
Deal value:
$13.4 billion
Date announced: Aug. 26, 2019

Amgen buying psoriasis drug Otezla is a byproduct of the merger between Bristol-Myers Squibb and Celgene. As soon as the news hit that U.S. antitrust regulators would require Celgene to sell the drug to win deal clearance, industry watchers began compiling a list of potential buyers—and a potential price.

Given consensus 2020 sales of about $2 billion, Wall Street analysts from Credit Suisse, Jefferies, RBC Capital and Wolfe Pharma arrived at estimated values between $8 billion and $10 billion.

Predicting where the drug would land was the more difficult task. It wasn't yet clear why the U.S. Federal Trade Commission (FTC) decided BMS' owning both Otezla, a PD4 inhibitor, and the investigational TYK2 inhibitor BMS-986165 would hurt competition. As Jefferies’ Michael Yee noted at the time, “a buyer presumably must not have too much direct overlap, but yet is interested in immunology and dermatology.”

The roster analysts put together included Amgen, Johnson & Johnson and Gilead Sciences. RBC’s Brian Abrahams rooted for Gilead, arguing that the company could benefit from Otezla’s commercial infrastructure as its own oral JAK inhibitor filgotinib neared a filing in rheumatoid arthritis.

Still, many were surprised in August when Amgen revealed itself as the buyer for Otezla; after all, the company’s TNF inhibitor Enbrel is already a major psoriasis player. Plus, Amgen's stable includes Amjevita, a biosimilar to AbbVie’s Humira. Why would two marketed blockbusters at one pharma giant be less anticompetitive than another blockbuster paired with an in-development therapy?

While many injectable and infused products are approved for psoriasis, though, Otezla and BMS-986165 are both oral treatments, and the latter is “the most advanced” oral candidate in development, the agency explained in its November statement approving the BMS-Celgene deal. At the same time, the FTC effectively blessed Amgen’s purchase, saying the Enbrel maker would have “the expertise, U.S. sales infrastructure, and resources to restore the competition” that would otherwise be lost.

RELATED: Yes, Amgen overpaid for Otezla—but that doesn't make it a mistake: analysts

The $13.4 billion price tag exceeded analysts’ estimates, indicating a fierce bidding war, even though the forced sale didn't put Celgene in a strong negotiating position. In fact, Amgen might have overpaid, but SVB Leerink analysts figure the company can make Otezla worthwhile, having pegged its peak sales at 50% higher than consensus estimates. The drug’s also on a fast growth trajectory; sales in the third quarter jumped 27% year over year to $547 million.

Amgen said it expects Otezla to deliver double-digit increases annually over the next five years, which means it could break even around 2024. That optimism depends on the drug’s ability to add new indications. In July, Otezla added a new approval in the rare disorder Behçet’s disease, its third on top of plaque psoriasis and psoriatic arthritis. The drug is also in testing in scalp psoriasis and juvenile idiopathic psoriasis, among other maladies.

Otezla is a much-needed addition for Amgen’s business. In the third quarter, the biotech’s overall revenues dropped 3% to $5.7 billion as its off-patent drugs Sensipar and Neulasta, as well as Neupogen and Epogen, took major sales blows.

Amgen closed the deal Nov. 22, right after BMS wrapped the Celgene buyout, and immediately dialed up its projected 2019 revenues to between $23.1 billion and $23.3 billion.

3. Amgen/Celgene's Otezla

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