Amgen's Proposed $13.4B Acquisition Of Celgene's Otezla: What You Need To Know

Amgen, Inc. AMGN is beefing up its inflammatory disease drug portfolio with a blockbuster psoriasis drug that Celgene Corporation CELG is being forced to divest as a regulatory requirement for the completion of its previously announced merger agreement with Bristol-Myers Squibb Co BMY.

The Deal Terms

Amgen announced Monday it has agreed with Celgene to acquire worldwide rights to Otezla for $13.4 billion in cash, or about $11.2 billion, excluding the net present value of $2.2 billion for anticipated future cash tax benefits.

The company said the closing of the transaction is subject to Bristol-Myers Squibb entering into a consent decree with the FTC in connection with the impending Celgene merger and the satisfaction of other customary conditions.

The deal is expected to close by the end of 2019.

Deal Rationale

Otezla is the only oral, non-biologic treatment, currently approved for three indications in the U.S., namely:

• moderate-to-severe plaque psoriasis in patients who are candidates for phototherapy or systemic therapy
• active psoriatic arthritis in adult patients
• oral ulcers associated with Bechet's disease in adults

Additionally, Otezla has been approved in more than 50 markets outside the U.S., including the European Union and Japan.

The product fetched Celgene sales of $1.6 billion in 2018, with much of the growth achieved on the back of volume increases. In the U.S., it has patent exclusivity running through at least 2028.

With the deal, Amgen is adding to its inflammatory diseases franchise, which already has a winner in Enbrel, marketed in the U.S. and Canada to treat moderate-to-severe plaque psoriasis, and psoriatic arthritis.

The company sees Enbrel and Otezla as complementary, as the former is more often prescribed for moderate-to-severe rheumatoid arthritis as opposed to the latter, which is often used by patients with moderate-to-severe psoriasis who are not satisfied with topical therapies.

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Otezla is also being studied now for potential new indications such as mild-to-moderate psoriasis.

Amgen is eyeing international sales growth thanks to Otezla's strong showing in major markets.

The company also sees the acquisition adding to its near- and long-term revenue growth rate as well as non-GAAP EPS immediately from the close.

Amgen expects to finance the deal from its cash balance and retain its investment grade credit rating.

"We will take advantage of our 20 years of experience in inflammatory disease to realize the full global potential of Otezla as an affordable option for patients with these serious, chronic inflammatory conditions," Amgen CEO Robert Bradway said in a statement. 

Win-Win Scenario

For Bristol-Myers Squibb, the Otezla divestment was seen as a "must" to clear regulatory hurdle.

The FTC had mandated the sale, as the company has an experimental late-stage drug in BMS-986165 — a TYK 2 inhibitor that is being evaluated for psoriasis.

Amgen shares were trading 1.89% higher at the time of publication Monday, while Celgene shares were up 3.04% and Bristol-Myers shares were gaining 2.96%. 

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Photo courtesy of Celgene.