What does it mean for other drug deals

Robert Galbraith | Reuters

The Federal Trade Commission last week Amgen to proceed with the $27.8 billion acquisition horizon treatments Under a settlement agreement – a move that could have implications for a series of other pharmaceutical acquisitions.

Some Wall Street analysts said the FTC’s decision to settle allows the sector to breathe a sigh of relief, as it suggests other large pending deals could continue relatively unscathed after the revisions. This includes an agency check PfizerCompany ””’ has offered to buy a cancer drug development company for $43 billion Visible.

“The settlement significantly alleviates the regulatory headwinds” of the Pfizer-Sign deal, William Blair analyst Matt Phipps said in a research note Friday. He added that the company expects to close the acquisition at the end of the year or early 2024.

More broadly, the settlement is “positive for the M&A space in this sector,” Truist analyst Robyn Karnauskas said in a research note on Friday.

But some analysts and M&A experts said the settlement agreement may not stop the FTC from baring its teeth on other big acquisitions in the industry. Some have also speculated that the restrictions imposed on Amgen as part of the settlement could have implications for other deals.

“I think in a positive way, we hope this helps other companies as they evaluate them,” said Nathan Ray, partner at Digital. “But I also think we’ve just heard there’s a greater desire to be active by the FTC.” West Monroe, the consulting firm that oversees healthcare mergers and acquisitions.

The Biden administration has moved to block a range of acquisitions across industries After decades of the government’s lean approach. The lawsuit the Federal Trade Commission filed against Amgen in May was the agency’s first legal challenge to drug procurement in 14 years.

The lawsuit also came amid a revival of mergers and acquisitions activity in the industry: pharmaceuticals Companies spent more than $80 billion on mergers and acquisitions in the first half of this year, according to data from Evaluate Pharma, putting 2023 on track to be the most dynamic year for deals since 2019.

The settlement agreement bars Amgen from bundling any of its products with two of Horizon’s blockbuster drugs, among other restrictions. This practice includes offering rebates or discounts on its existing products to pressure insurers and pharmacy benefit managers to favor Horizon products.

These terms of the deal are likely to be “non-working” for Amgen, which has stated it has no intention of bundling the products, said Evan Sigerman, analyst at BMO Capital Markets.

However, some analysts said the restrictions indicate the FTC may apply similar rules to other acquisitions in the future.

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“We also believe this may be a topic in future mergers and acquisitions as such restrictions will apply to all future transactions,” Karnauskas of Truist said in a note.

It is unclear whether future restrictions on other companies could have a more significant impact on their business. But analysts at Wells Fargo, in a research note on Friday, said the restrictions on Amgen “could pose a challenge to future deals”.

West Monroe’s Ray added that the settlement agreement could “open up other drug deals for some kind of review” by the FTC.

He said that was because the agency seemed comfortable finding “fairly narrow reasons why there were problems” in deals, even those that did not appear to create anti-competitive attitudes. Ray contends that the Amgen-Horizon deal does not reduce competition because the two companies have vastly different drug portfolios and do not compete — a view shared by many analysts.

However, the settlement agreement could make the drug industry “think more” before pursuing mergers and acquisitions, according to Wells Fargo analysts.

“We’re seeing the FTC scrutinize larger deals more,” the analysts wrote. They added that they believe pharmaceutical companies “want to stay under the radar with deals worth less than $10 to $15 billion.”

In a statement released on Friday, FTC Chair Lena Khan indicated that the agency would not shy away from antitrust scrutiny of the pharmaceutical industry.

Khan said the FTC “will continue to challenge illegal practices that raise drug prices, block access to drugs, stifle innovation, or harm patients.”

Correction: Nathan Ray is a partner at digital advisory firm West Monroe who oversees healthcare mergers and acquisitions. An earlier version labeled the company in error.

(tags for translation) Federal Trade Commission

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