2023-06-12 17:24:12
Drug price scammer Martin Shkreli was unique. But the antitrust officials have new reasons for get mad at the pharmaceutical industry. The US Federal Trade Commission now disapproves of his “rampant consolidation.”
A sign of a more interventionist approach is the renewed distrust of vertical acquisitions.
Drug price scammer Martin Shkreli was unique. But the antitrust officials have new reasons for get mad at the pharmaceutical industry. The US Federal Trade Commission now disapproves of his “rampant consolidation.”
A sign of a more interventionist approach is the renewed distrust of vertical acquisitions. These combine companies from the same supply chain.
Illumina bought cancer test development company Grail for 8,000 million dollars (7,450 million euros) in 2021, despite the fact that US and EU authorities complained that the US gene sequencer could deny Grail’s rivals crucial inputs. On Monday, its CEO, Francis deSouza, resigned following a dispute with activist investor Carl Icahn over Illumina’s decision to go ahead.
Another sign of the hardening of positions was the FTC’s attempt last month to block Amgen’s acquisition of Horizon Therapeutics for 28.3 billion dollars, despite the fact that both companies treat different diseases. His argument – not proven – is that Amgen could use the discounts on its best-selling products to encourage insurers and pharmacy benefit managers to switch to Horizon medicines.
The FTC’s intervention shocked the industry, which depends on agreements to replenish the catalog of medicines. Small companies produce two thirds of the new active ingredients. Mergers and acquisitions activityand not excellence in research and development, is what explains the persistence of leading companiesaccording to Wharton professor Patricia Danzon.
In the first five months of the year, the pharmaceutical giants spent $85 billion on operations. Imminent patent expiration adds urgency to shopping. Novartis’ $3.5 billion acquisition of Seattle biotech Chinook Therapeutics on Monday is a case in point. Berenberg forecasts zero sales growth from 2025, barring any new additions to the portfolio.
Many analysts expect antitrust officials to focus on medium and large size operations. This would be a relief for cash-strapped small biotechs, especially after share prices plummeted in late 2021 and IPO markets remained largely closed. But any M&A barriers would make it difficult for pharmaceutical giants to improve profits and pay generous dividends. The antitrust challenge may force big pharmaceutical groups to rethink “pure” business models.
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