Biotech heavyweight Amgen (AMGN 0.22%) will probably continue to be an active player in the merger and acquisition (M&A) scene, regardless of what happens with its proposed $28 billion buyout of Horizon Therapeutics (HZNP). Even with Horizon and its lineup of specialty branded medications in the fold, Amgen would benefit from adding more products and pipeline candidates to its portfolio because it faces two major challenges.
One challenge is the ongoing pricing pressure on some of its best-selling drugs, such as Enbrel for autoimmune diseases, Epogen and Aranesp for anemia, and Neupogen and Neulasta for neutropenia. These drugs are facing pricing pressures from branded and biosimilar competitors, as well as from payers and regulators. Another hurdle is the lack of depth and differentiation in its early and midstage pipeline compared to its peers in the industry.
What might Amgen buy? Here are two top candidates based on the biotech's core area of expertise and potential budgetary constraints.
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Two affordable, high-impact M&A candidates
Amgen's near-term M&A budget will depend on the outcome of its legal battle with the Federal Trade Commission over its proposed merger with Horizon. If this acquisition goes through, for instance, Amgen will probably be limited to smaller deals under $10 billion.
The good news is that there is a surfeit of attractive buyout targets at this price point. For example, gene-editing pioneer Intellia Therapeutics (NTLA 3.70%) and rare-disease specialist Rhythm Pharmaceuticals (RYTM 0.34%) would both provide excellent value for an acquirer right now.
Intellia is developing two products based on gene editing: NTLA-2001 for a rare disease called transthyretin amyloidosis and NTLA-2002 for another uncommon condition called hereditary angioedema. NTLA-2001 is a joint project with Regeneron Pharmaceuticals, while NTLA-2002 is fully owned by Intellia. The company also plans to trial several other gene-edited therapies for diseases such as alpha-1 antitrypsin deficiency and rare bleeding disorders, among other undisclosed indications.
Acquiring Intellia might be a smart move on Amgen's part, as it would gain access to these promising clinical candidates and add a novel technology (CRISPR/Cas9 gene editing) to its internal research and development capabilities. What's more, Amgen might be able to buy Intellia for as little as $7 billion given the company's modest market cap of $3.6 billion at the time of this writing. That's a downright bargain for a platform capable of producing multiple blockbuster-level products in several areas of high unmet medical need.
Rhythm Pharmaceuticals is a commercial-stage biotech developing novel molecules for rare genetic obesity disorders. The company's flagship product is Imcivree (setmelanotide). The drug is presently approved by the Food and Drug Administration (FDA) for a handful of rare, inherited forms of severe obesity.
Rhythm is also trialing the drug in other weight management settings, which could significantly grow its sales over the course of the decade. As things stand now, Imcivree's peak sales could range from $300 million to over $1 billion per year, depending on its clinical development.
Despite harboring a potential blockbuster, Rhythm's market cap presently stands at approximately $1 billion. The biotech giant could thus buy Rhythm for perhaps less than $2.5 billion, which is not a significant financial risk for a company of Amgen's size (current market cap of $118 billion).
However, the deal also comes with some uncertainty, as Imcivree's clinical development in other indications is still ongoing and may not meet the expected outcomes. Even so, this proposed deal still sports a favorable risk-to-reward ratio for Amgen.
