The Amgen, Inc. (NASDAQ: AMGN) share price edged 3% lower after Bloomberg reported that the company had agreed to buy Horizon Therapeutics in a deal worth $26 billion.
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According to the exclusive report, Amgen had secured the deal after French drug manufacturer Sanofi walked away from negotiations to buy the Ireland-headquartered firm, saying that the price expectations were way above its value creation threshold.
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The deal comes after Johnson & Johnson walked away from negotiations to acquire Horizon without giving any specific reasons for abandoning the talks. Investors' reaction to the news was mixed, with Horizon shares rising and Amgen shares falling.
The slight drop in Amgen’s share price could be attributed to the fact that the firm is taking on massive risk by acquiring Horizon for such a high price, with many wondering whether it can recoup its investment.
Dealmaking in the pharmaceutical and biotech industries has recently ramped up as companies turn their attention away from COVID-19 to other rare diseases that still need treatments. Horizon generates most of its revenues from treating a painful autoimmune condition called thyroid eye disease via its drug Tepezza. The company also has other drugs, including Ravicti, a treatment for inborn urea disorders, and Krystexxa for chronic gout disease.
However, many analysts are warning that the current economic environment is not conducive for the massive deals given the looming recession that most predict will hit the US and other developed economies next year as the recent rate hikes start impacting economic activities.
The US Federal Reserve,w which sets the tone for other central banks, is about to start tapering its rate hikes this week as inflation slows down and the jpb market softens. Even the hot housing market is showing signs of cooling down due to the rate hikes.
The most optimistic view for next year is that the US economy could rebound in the second half as the Fed stops hiking rates and starts lowering them, among other quantitative easing measures.
*This is not investment advice.
Amgen stock price.
The Amgen stock price edged 3.06% lower to trade at $270.12, falling from Friday’s closing price of $278.65.
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