The Federal Trade Commission (FTC) recently approved Amgen’s acquisition of Horizon Therapeutics, a major move that could impact the landscape of the pharmaceutical industry. This settlement agreement has relieved some regulatory concerns and has implications for other pending buyouts, including Pfizer’s proposed purchase of cancer drug developer Seagen. While the settlement agreement is seen as a positive development for the M&A space in the sector, some analysts speculate that the FTC’s scrutiny may extend to other large-scale buyouts. This article explores the FTC’s decision, its potential impact on the pharmaceutical industry, and what it means for future deals.
Background: FTC’s Regulatory Landscape
In recent years, the FTC has taken a more stringent approach to acquisitions across various industries, marking a departure from the previous light-touch approach. The lawsuit against Amgen was the FTC’s first legal challenge to a pharmaceutical buyout in 14 years and reflects a broader shift in the regulatory landscape. This change comes at a time when the pharmaceutical industry is experiencing a rebound in M&A activity, with companies spending over $80 billion on deals in the first half of 2023.
Amgen’s Acquisition of Horizon Therapeutics
Amgen’s $27.8 billion acquisition of Horizon Therapeutics faced regulatory scrutiny from the FTC. However, the recent settlement agreement allows the deal to move forward. The agreement includes certain restrictions, such as prohibiting Amgen from bundling its products with two of Horizon’s blockbuster drugs. Bundling typically involves offering discounts or rebates on existing products to incentivize insurers and benefit managers to prioritize specific drugs.
While some analysts believe these conditions are unlikely to significantly impact Amgen, as the company has stated it does not intend to bundle products, others see this as a potential precedent for future buyouts. The implications of these restrictions suggest that the FTC may apply similar rules to other acquisitions in the industry.
Impact on Other Pharmaceutical Deals
The FTC’s decision to settle the Amgen-Horizon acquisition has broader implications for other pending deals in the pharmaceutical sector. Wall Street analysts believe that the settlement eases regulatory headwinds and signals that other large-scale acquisitions could proceed relatively unscathed after reviews. One such deal is Pfizer’s proposed $43 billion purchase of Seagen, a cancer drug developer.
According to William Blair analyst Matt Phipps, the settlement materially mitigates regulatory challenges for the Pfizer-Seagen deal. The analyst expects the acquisition to close by the end of the year or early 2024. Truist analyst Robyn Karnauskas also views the settlement as a positive development for the M&A space in the sector. However, industry experts and analysts remain cautious, speculating that the FTC’s appetite for scrutiny may extend beyond the Amgen-Horizon deal.
Analyzing the Settlement Agreement
The settlement agreement between Amgen and the FTC allows for the acquisition to proceed, but it comes with certain conditions. The prohibition on product bundling is a significant restriction imposed on Amgen. By preventing the bundling of products, the FTC aims to ensure fair competition in the pharmaceutical market. The practice of bundling can create a disadvantage for competitors by leveraging existing products to favor specific drugs.
BMO Capital Markets analyst Evan Seigerman considers these conditions on the Amgen-Horizon deal to be a non-factor for Amgen, given the company’s stance on bundling products. However, the inclusion of these restrictions raises questions about the FTC’s future approach to other acquisitions in the industry. The regulatory environment is evolving, and it remains to be seen how the FTC will navigate this changing landscape.
The Future of M&A in the Pharmaceutical Industry
The settlement agreement between Amgen and the FTC has eased concerns surrounding the regulatory landscape for pharmaceutical M&A. While it signals a positive development for the sector, analysts and experts remain cautious about potential future scrutiny from the FTC regarding other large-scale buyouts. Nathan Ray, a partner at West Monroe, a digital consulting firm specializing in healthcare M&A, believes that the FTC’s decision may encourage other companies to be more active in pursuing acquisitions. However, he also suggests that the FTC’s appetite for scrutiny may continue to grow.
The Biden administration’s increased focus on blocking acquisitions across industries has set the stage for a more robust regulatory environment. As the pharmaceutical industry experiences a resurgence in M&A activity, companies will need to navigate this changing landscape carefully. Compliance with regulatory requirements and an understanding of the potential implications of the FTC’s decisions will be crucial for successful deal completions.
See first source: CNBC
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