What it means for other pharmaceutical deals

The Federal Trade Commission approved it last week Amgen to advance the $27.8 billion acquisition of Horizon Therapeutics under a Comparison – a move that could have implications for a number of other pharmaceutical industries Purchases.

Some Wall Street analysts said the FTC’s decision to settle provides a sigh of relief for the sector because it suggests other large pending deals could emerge relatively unscathed following the reviews. This also includes examination by the authorities Pfizerhas proposed a $43 billion purchase of a cancer drug developer Seagen.

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

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

But some analysts and mergers and acquisitions experts said the settlement agreement may not stop the FTC from flexing its teeth on other major acquisitions in the industry. Some also speculated that the restrictions imposed on Amgen as part of the settlement could impact other businesses.

“I think in a positive way this will hopefully help other companies when they get evaluated. But I also think what we’re hearing right now is that there’s more interest from the FTC to take action,” said Nathan Ray, a partner at healthcare consulting firm West Monroe, which oversees M&A.

The Biden administration has decided to block a series of cross-industry acquisitions after decades of loose government approach. The FTC’s lawsuit against Amgen in May was the agency’s first legal challenge to a pharmaceutical takeover in 14 years.

The lawsuit also came amid a rebound in M&A activity in the pharmaceutical industry Accordingly, companies spent more than $80 billion on mergers and acquisitions in the first half of this year Data from Evaluate Pharma and expects 2023 to be the year with the most deals since 2019.

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

Evan Seigerman, an analyst at BMO Capital Markets, said these terms of the deal likely “don’t matter” to Amgen because the company has said it doesn’t intend to bundle products.

But some analysts said the restrictions suggest the FTC could apply similar rules to other acquisitions in the future.

“We also believe this could be an issue in future mergers and acquisitions where such restrictions … will apply to all future transactions,” Truist’s Karnauskas said in a note.

It is unclear whether future restrictions imposed on other companies could have a major impact on their businesses. But analysts at Wells Fargo said in a research note Friday that the restrictions imposed on Amgen “could pose a challenge to future operations.”

West Monroe’s Ray added that the settlement agreement “could open up other pharmaceutical businesses to some type of scrutiny from the FTC.”

That’s because the agency appears to have no problem finding “fairly narrow reasons why they might have problems” in deals, even ones that don’t appear to create anticompetitive situations, he said. Ray maintains that the Amgen-Horizon deal does not reduce competition because the two companies have very different drug portfolios that do not compete with each other – a view shared by many analysts.

Still, the settlement agreement could force the pharmaceutical industry to “think more” before pursuing mergers and acquisitions, Wells Fargo analysts said.

“We believe the FTC is placing greater scrutiny on larger deals,” the analysts wrote. They added that they believe pharmaceutical companies “want to stay under the radar with deals under $10-15 billion.”

In one opinion On Friday, FTC Chairwoman Lina Khan signaled that the agency would not let up on its antitrust oversight of the pharmaceutical industry.

The FTC will “continue to crack down on unlawful practices that increase drug prices, hinder access, stifle innovation or otherwise harm patients,” Khan said.