Horizon Therapeutics may soon face an existential crisis if federal regulators successfully block its proposed $27.8 billion merger with Amgen, a move that would force it to remain independent or find a new buyer regulators would approve.

Horizon's future became murky May 16 after the Federal Trade Commission filed a lawsuit to block its merger with California pharma giant Amgen. The FTC argues the deal, announced in December, would allow Amgen to use its market power to pressure insurers and pharmacy benefit managers to favor two key Horizon drugs, including Tepezza, used to treat thyroid eye disease, and Krystexxa, used to treat chronic refractory gout. Right now, neither have marketplace competition.

The FTC's lawsuit is the first challenge to a pharmaceutical merger in recent memory, the agency's Bureau of Competition Director Holly Vedova said in a statement. The lawsuit also targets unconventional anti-competitive concerns, experts say.

"This is a very unusual position," says Thomas Lys, professor emeritus at Northwestern University's Pritzker School of Law. "The FTC has big muscle when it comes to concerns about market concentration, but having power over something — that's a little bit loose. That is a situation that will be harder for the FTC to win."

"The company is kind of in limbo . . . and that is value- destroying for a merger," Lys says. "The best people may leave in the meantime because it's not clear what's going to happen. Uncertainty is really bad for business."

Amgen and Horizon say they intend to fight the lawsuit and aim to still close the transaction by mid-December. If the deal falls through, Amgen would be required to pay Horizon more than $974 million under their merger agreement. Additionally, Horizon CEO Tim Walbert would also lose the opportunity to reap a massive windfall of cash. Crain's previously estimated Walbert would make about $150 million in the Amgen deal.

Failure to close the deal would leave Horizon with basically two options — find a new buyer the FTC would approve of or find ways to grow as an independent company.

Horizon, which employs 2,000 people globally, including 700 in Deerfield, declined to comment on what it would do if the Amgen deal falls through.

CONCERNS

Finding a new buyer will be difficult, experts say, as Horizon would need to identify a partner that won't trigger the FTC's specific concerns around market power. That would likely mean finding a smaller company to merger with, says Ezra Friedman, a professor at Northwestern University's Pritzker School of Law.

"If it was a smaller company than Amgen, it would be easier," Friedman says. "The FTC would look much more kindly on it."

Before striking a deal with Amgen, Horizon was approached by other pharmaceutical companies, including Paris- based Sanofi. But Sanofi, with $43 billion in revenue, is even larger than Amgen, with $24.8 billion, making it a less-than-ideal alternative.

"If what the FTC wrote is correct and they're just concerned about this bundling issue, I don't see why that's unique to Amgen," says Karen Andersen, a sector strategist at Morningstar.

On the other hand, if Horizon is forced to remain independent, part of its growth strategy would likely be focused on doubling down on the drugs it already manufactures.

"A big part of it is just capitalizing on the long runway for Tepezza," Andersen says.

It would also need to spur organic growth with research and development, especially as some of their drugs, including Krystexxa, near losing exclusivity. To offset competitive losses, Horizon would either need to acquire smaller biotech firms developing new drugs or develop new medications on its own. However, Horizon notably grew to its size without licensing any of its own drugs.

"They'll need to the look at the playbook for other pharmas like them, which is to find new drugs and requires either buying them or discovering them," says Nathan Ray, a partner at Chicago consulting firm West Monroe.

Horizon could break itself up by spinning off critical drugs into standalone companies, but Lys says there is no guarantee that would attract FTC approval either if the drugs at issue still spark anticompetitive concerns.

With the lawsuit, the FTC also voted to implement a temporary restraining order and preliminary injunction, meaning the merger is on hold.

In the meantime, while Horizon and Amgen await their fate, the two companies could watch their stock prices fall. Horizon's stock fell more than 15% on May 16 before recovering some of its losses. Meanwhile, Amgen's stock lost about 3% that day.