Fresh antitrust push hits biopharma

Evaluate Vantage takes a look at the still-open deals that might come under threat from a new international clampdown.

Policy and regulation

Yesterday’s launch of an international regulatory push to scrutinise future – and possibly prior – pharmaceutical mergers will cause deal bankers to shift uneasily in their leather armchairs. The assumption is surely that this will make it harder, not easier, to pull off a big takeover.

The S&P Pharmaceuticals Index dipped 1% yesterday, though interestingly Nasdaq Biotechnology was flat. To the extent that such broad sector moves can be put down to one thing the markets seem to be assuming that big pharma will not be allowed to grow indefinitely, but that takeovers of small companies, essential to restock pharma pipelines, will not be threatened.

However, given comments made during a US FTC press call yesterday, it is far from certain that this is indeed the case. The agency said the impact of pharmaceutical mergers was not "just about the respective size of the two companies”, theoretically threatening any move that results in excessive drug pricing power.

End of the megamerger?

The FTC, alongside other agencies worldwide, including the UK's Competition and Markets Authority, is looking to update the way it analyses the effect of pharmaceutical mergers, with a focus on putting a stop to “skyrocketing” drug prices and anticompetitive practices.

In this regard, megamergers look like the obvious targets. Indeed, in yesterday's call the FTC’s acting chair, Rebecca Kelly Slaughter, called out several recent large deals including Bristol Myers Squibb’s purchase of Celgene and Abbvie’s takeover of Allergan.

Evaluate Vantage has analysed biopharma acquisitions that are yet to close, and only one – the takeover of Alexion by Astrazeneca – fits into the megamerger bracket. This could therefore be in the danger zone.

A focus on megadeals would also put paid to a rumoured move by Astra on Gilead, although even before the antitrust clampdown such a deal seemed far-fetched (Astrazeneca wants Gilead; or does it?, June 8, 2020). But the new review is surely a blow to anyone hoping that Gilead, whose shares are not far off five-year lows, might get bought.

As for small bolt-ons, Ms Slaughter discussed Roche’s $4.8bn acquisition of Spark, which was delayed over fears that the former might deprioritise Spark’s haemophilia A gene therapy for the benefit of its own haemophilia A drug Hemlibra.

The FTC finally closed its investigation in December 2019 without requiring any asset sales; however, if there is going to be greater scrutiny of such transactions this could threaten the whole biopharma ecosystem and leave many execs wondering how to refresh ailing pipelines.

The most obvious measure to look at here would be overlap between portfolios and pipelines of the acquirer and target. Of the deals that are currently open, Astra/Alexion again looks like a possible target of the FTC's attention.

At risk of greater scrutiny? Pharma M&A deals yet to close
Acquirer Target  Deal value  Potential indication overlaps?
Astrazeneca Alexion  $39bn  No indication overlap with Astra/Alexion's marketed drugs; possible pipeline overlap with Alexion's ALL project cerdulatinib & Astra's blood cancer franchise
Jazz  GW Pharmaceuticals $7bn GW being bought largely for epilepsy product Epidiolex; Jazz has ph2 epilepsy asset but no marketed drugs; general neurology focus overlap
Servier Agios oncology division  $2bn  Agios is being bought for its blood cancer portfolio; Servier has a large cancer business
Sanofi Kiadis Pharma $358m Kiadis's lead programme is targeting blood cancers; Sanofi sells Sarclisa for multiple myeloma, and has a broad oncology portfolio
Cipla Avenue Therapeutics $180m Avenue being bought for a phase III Tramadol formulation; Cipla has large existing pain franchise
Source: EvaluatePharma.

Ironically, Alexion itself had grown through several acquisitions of smaller companies for their competing and clearly overlapping assets.

Ms Slaughter noted that the FTC was already good at analysing product and pipeline overlaps – and now it wants to go further and look at “bigger-picture questions”. She also did not rule out the possibility of revisiting transactions that had already closed.

If this is really the case then theoretically no recent deals are safe, though companies can rest assured that any review with this kind of international scope will take a long time to reach firm conclusions.

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