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Amgen: Follow Up Thoughts on IPT
Eric Axon, CFA – Co-Head of US HY Research / Senior Analyst - Healthcare
Patrick Cunniff – Analyst - Healthcare
EXECUTIVE SUMMARY
- Initial price talk on Amgen’s new bond deal has been disclosed. We provide follow up thoughts on pricing and relative value.
- We expect the short-dated tranches to see material pre-launch spread compression and would be buyers down to just ~10 bp of NIC, though we suspect the new deal will come wide to those levels.
- By our estimate, the new 7-10Y senior notes offer concessions (versus IPT) of a whopping ~37-44 bp. We expect to see at least 20 bp of pre-launch tightening (perhaps more), implying new issue spreads of T+135-140 bp on the 7Y and T+150-155 bp on the 10Y.
RELATIVE VALUE
Amgen is in the market with an 8-tranche offering of senior unsecured notes with maturities ranging from 2025-2063. The notes will be issued out of Amgen Inc., the primary issuing entity. Deal size is undisclosed as of this writing, but we expect it to total $18-20 bn.
As previously noted, proceeds from the offering – along with TLB proceeds ($4 bn) and cash on hand (TBD) – will be used to fund the ~$28 bn Horizon acquisition. We maintain a constructive stance on the acquisition despite the sizeable impact to net leverage (3.3x pro forma for the transaction).
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