Amgen Inc. agreed to purchase Celgene Corp.'s psoriasis drug Otezla for $13.4 billion in cash, a deal CEO Bob Bradway said is a way to take advantage of the recent biopharma megadeal frenzy.
The U.S. Federal Trade Commission ordered Bristol-Myers Squibb Co. to divest Otezla to complete the pending $95 billion acquisition of Celgene and avoid overlap in the combined company's portfolio. Bristol-Myers has a psoriasis drug in late-stage clinical trials that represented an anti-competitive risk with Otezla, the FTC found.
The divestment opened a window for Amgen to bolster its own line of anti-inflammatory drugs. The deal is expected to close by the end of the year.
"As this transaction shows, there are many ways to benefit from the ongoing consolidation in our industry," Bradway said during an Aug. 26 call. "This opportunity was created for us by industry consolidation and we're happy to be in the position to capitalize on it."
Bradway and other executives on the call said Otezla — a non-biologic, oral drug called apremilast — fits well with Amgen's lineup of psoriasis drugs that includes the biologic Enbrel and Amjevita, a biosimilar to AbbVie Inc.'s Humira, the best-selling drug in the world in 2018. Amgen recently celebrated a legal decision blocking Novartis AG's biosimilar of Enbrel, giving the branded drug more time without competition in the market.
"While we were already a leader in inflammatory disease, there's no question that this deal will strengthen our position in that important therapeutic category and we expect to be a strong owner of Otezla, well-positioned to capitalize on the full potential of this medicine," Bradway said.
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Global sales of Otezla, first approved in 2014, have grown substantially to $1.6 billion in 2018. SVB Leerink analyst Geoffrey Porges expects the drug to reach sales of $2 billion in 2020 and $2.45 billion in 2021, making the deal "immediately profitable for Amgen," he said in an Aug. 26 note.
With exclusivity on Otezla's U.S. patent expected to continue through 2028, Bradway said there is a "strong case for long-term unit volume growth," especially if the company can attach label updates and further indications to the drug down the road.
Executive Vice President of Global Commercial Operations Murdo Gordon said that, outside the U.S., Otezla represents an opportunity in Europe and Japan, feeding into Amgen's strategic priority on international expansion.
"As you go ex-U.S. with our biosimilars portfolio, namely Amjevita, in the big five markets in Europe, we have a good strong presence and good share performance with that," Gordon said. "So the additional portfolio of Otezla will be really, really helpful as we expand and continue to strengthen our international footprint."
Debating Otezla's value
Leerink analyst Porges said Amgen likely overpaid for the drug by $2 billion to $3 billion, with the $13.4 billion price tag valuing Otezla at almost seven times the 2019 expected full year sales.
"The transaction does not seem outrageously expensive to us, but the presence of other bidders is likely to have driven Amgen's final price toward the upper end of fair value ranges," Porges said.
Similarly, Mizuho analyst Salim Syed said the expected net present value was between $5 billion and $10 billion.
Celgene did not return a request for comment on the presence of additional bidders for Otezla as of publication.
For Bristol-Myers and Celgene, though, the transaction was positive, Porges and Syed said, as it got the companies' megadeal past anti-competitive concerns. The deal was originally planned for a third quarter closing, but because the FTC requested more information about the psoriasis therapies, the companies pushed the expected close to the end of 2019 or beginning of 2020.
"The transaction makes it easier and more likely that Bristol-Celgene will close, by eliminating one of the most significant obstacles to Bristol's acquisition," Porges said.
Shares of Amgen were up 2.95% to $204.96 as of 11:52 a.m. ET Aug. 26, and shares of Bristol-Myers were up 3.26% to $48.10 at the same time.
Fitch Ratings reported that Amgen's BBB rating would not be affected by the Otezla acquisition, due to the complementary nature of the deal and Amgen's ability to maintain liquidity.

