What happened
Shares of Horizon Therapeutics (HZNP), a rare disease specialist, were down by 17.4% on heavy volume as of 10:14 a.m. ET Tuesday morning. The drugmaker's shares are falling after news broke that the Federal Trade Commission (FTC) plans to seek an injunction in federal court to halt the company's takeover by Amgen (AMGN -0.20%).
Per multiple sources, the FTC intends to challenge the Amgen/Horizon merger over antitrust concerns. Last December, Amgen and Horizon agreed to a $27.8 billion buyout agreement, making it the largest business development deal in biopharma in 2022.
So what
If the FTC is indeed successful at nixing this deal, Horizon will have to revert to its organic prospects to create shareholder value in the near term. Although its top line has been growing at a blistering pace of late due to newer products such as the thyroid eye disease treatment Tepezza, Amgen's buyout price did come at a hefty premium relative to Horizon's 2024 outlook.
In fact, the deal was valued at a staggering 6.1 times Horizon's projected 2024 sales. Amgen seemingly agreed to this sizable price tag due to its ongoing battle with the patent cliff. So, not surprisingly, Amgen's shares were also down modestly (approximately 0.7%) in the wake of this news.
Now what
Is Horizon's stock a buy on this dip? While there is the very real risk that further downside could be ahead in the event Amgen is forced to abandon this deal, it's important to bear in mind that the FTC has failed to scuttle other proposed mergers in the recent past.
In other words, this dip might be totally unwarranted. What's more, Horizon would probably fetch another tender offer within the next 12 months if Amgen is unable to proceed. So if you're comfortable with some near-term volatility, Horizon's stock may indeed be worth snapping up today.
