The Implications of Other Pharma Deals

The Federal Trade Commission (FTC) recently approved Amgen’s $27.8 billion acquisition of Horizon Therapeutics through a settlement agreement. This decision has significant implications for the pharmaceutical industry’s future buyouts.

Wall Street analysts believe that the FTC’s settlement sets a positive precedent, indicating that other pending deals, including Pfizer’s $43 billion purchase of Seagen, may proceed without major obstacles.

William Blair analyst Matt Phipps asserts that the settlement eases regulatory challenges for the Pfizer-Seagen deal and expects it 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 mergers and acquisitions space in the sector.

However, some analysts and M&A experts caution that the FTC may still scrutinize other large buyouts in the industry. They speculate that the restrictions imposed on Amgen as part of the settlement could have broader implications for future deals.

Nathan Ray, a partner at digital consulting firm West Monroe, suggests that while the settlement may benefit other companies during evaluations, there is an increasing appetite within the FTC to be more active in regulating M&A activities.

Under the Biden administration, there has been a shift towards blocking acquisitions across industries. The FTC’s lawsuit against Amgen was its first challenge to a pharmaceutical buyout in 14 years. This legal action coincides with a surge in M&A activity in the pharmaceutical sector, with companies spending over $80 billion on deals in the first half of 2023, the highest since 2019.

The settlement agreement between the FTC and Amgen includes restrictions on product bundling and aims to prevent anti-competitive practices. Analysts believe these conditions may serve as a precedent for future deals and could make the pharmaceutical industry more cautious about pursuing M&A.

Truist’s Karnauskas believes that future M&A deals may face similar restrictions, potentially impacting their outcomes. Wells Fargo analysts also assert that the limitations imposed on Amgen could pose challenges for future deals in the industry.

Nathan Ray suggests that the settlement agreement may lead to increased FTC review of other pharma deals. The FTC has shown a willingness to identify specific concerns even in deals that may not appear anti-competitive.

In response to the settlement, the Wells Fargo analysts anticipate that pharmaceutical companies may be more cautious in pursuing M&A, particularly larger deals. They suggest that deals below $10-15 billion may attract less regulatory scrutiny.

FTC Chair Lina Khan emphasizes that the agency will continue its antitrust scrutiny in the pharmaceutical industry to combat practices that impact drug prices, access, innovation, and patient well-being.