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  • Jonathan Poyer

A Hurricane Can Be Just a Press Release Away - When the FDA Comes, the Wind Blows

The S&P Select Biotech Index rallied back towards the 50-day moving average as the Federal Trade Commission (FTC) blinked first in the legal fight over Amgen's (AMGN) proposed acquisition of Horizon Therapeutics (HZNP).

FTC agreed to a settlement with AMGN that will allow the $28 billion dollar transaction proceed on the original financial terms. AMGN re-affirmed the public commitment not to bundle HZNP's medical benefit orphan drugs with AMGN's pharmacy benefit drugs. Give this practice would not make sense financially or logically it is hard to consider this much of a concession.

Likewise, the additional requirements to limit the future acquisition of potential competitors to HZNP's orphan products appears well within expectations and established precedent. HZNP shares rallied to within <1% of the deal price reflecting the market placing near certain odds of closure before the end of the year.

Seagen (SGEN) shares rallied in sympathy, closing the arbitrage spread to <10% of Pfizer's (PFE) proposed acquisition price, from nearly double that the week earlier. We continue to expect additional M&A activity into the end of the year. Year-end performance reviews often motivate action on large cap growth initiatives via goals set for the executive teams.

Moonlake Immunotherapeutics (MLTX) poured some cold water on near term M&A speculation by filing for a $1 billion mixed shelf and a $350 million equity sales agreement. Management teams must walk a fine line between confidence and saving for a rainy day as a biotech company can be just a press release away from hurricane season.

Case in point were strategic reorganization announcements form both Apellis Pharmaceuticals (APLS) and Sage Therapeutics (SAGE). APLS is reducing headcount by 25% (n=225) to save $300 million by 2024 while continuing to drive growth of SYFORVE in light of recent safety concerns. SAGE is implementing a 40% workforce reduction following a mixed regulatory update that will lead to an annualized net savings of ~$240 million.

Outlook Therapeutics (OTLK) found itself in the eye of the storm as well as FDA issued a CRL to the company's BLA for ONS-5010, an investigational ophthalmic formulation of bevacizumab under development to treat wet AMD. Shares sank 70% to below $60 million market capitalization, making the dilution math more difficult if and when the company decides to come back to the market.

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