In a surprising turn of events on September 1, the U.S. Federal Trade Commission gave the green light to Amgen’s colossal $27.8 billion takeover of Horizon Therapeutics, marking the end of months of intense scrutiny. However, rather than applauding this decision, experts are calling it a major setback for the agency’s ambitious antitrust enforcement plans.
The FTC’s choice to resolve the Amgen/Horizon case through what’s known as a “behavioral remedy” has sent shockwaves through the legal and business communities. This decision carries profound implications not only for the ongoing Amgen-Horizon deal but also for the future of M&A challenges under the FTC’s watchful eye. Two prominent antitrust lawyers, interviewed by BioSpace, weighed in on the significance of this development.
Jeny Maier, an antitrust partner at Axinn, Veltrop & Harkrider LLP, observed, “The FTC seems to be acknowledging the tough road it faced in convincing a district court judge to outright block the transaction based on a novel legal theory of harm.” What makes this even more striking is FTC Chair Lina Khan’s outspoken criticism of behavioral remedies. Maier added, “It’s worth noting that Chair Khan, known for her vocal critiques of these remedies’ effectiveness in addressing merger-related harms, testified before the Senate last year, stating, ‘We now strongly disfavor behavioral remedies.’
The FTC’s Case
In a plot twist fit for a legal thriller, the Amgen-Horizon merger, initially announced with great fanfare in December 2022, hit a roadblock in May 2023. The Federal Trade Commission (FTC) threw a curveball by filing a lawsuit, not based on the usual concerns about competing products, but rather, over the potential impact on competition arising from Amgen’s rebate program.
At the heart of the FTC’s complaint were two prized possessions of Horizon: Tepezza, a lifesaver for those with thyroid eye disease (TED), and Krystexxa, the sole FDA-approved remedy for chronic refractory gout (CRG). These medications enjoyed a near-monopoly in their respective markets.
But here’s where it gets intriguing: the FTC argued that Horizon anticipated competition from emerging clinical-stage contenders. Armed with a biopharmaceutical arsenal boasting nine products each raking in over $1 billion in sales in 2022, the FTC’s worry was that the merger would shield Horizon from this impending competition.
Amgen, on the other hand, staunchly insisted that their acquisition of Horizon was simply an expansion of their rare disease portfolio and not a ploy to stifle competition. To cement their commitment, Amgen willingly inked an FTC consent order agreement, pledging not to bundle their products with Tepezza or Krystexxa, among other stipulations.
This showdown unfolds against the backdrop of the Biden administration’s aggressive stance on antitrust enforcement, spearheaded by both the FTC and the Department of Justice. Their targets are Various sectors, including the pharmaceutical realm, which has been under intense scrutiny lately.
In a recent twist of fate, on August 25, the U.S. Court of Appeals for the District of Columbia Circuit dismissed an FTC lawsuit alleging antitrust violations related to the opioid Opana ER. The court cited a lack of substantial evidence to back the FTC’s claims.
George Gordon, a legal luminary from Dechert LLP who argued the case for Endo Pharmaceuticals, hailed the ruling as a significant moment in an antitrust landscape increasingly skeptical of patent rights and their exercise.
Going Forward: What to Expect
The Amgen case outcome has set a precedent that’s sending shockwaves through the world of mergers and acquisitions. Jeny Maier, the antitrust guru at Axinn, Veltrop & Harkrider LLP, believes that this victory for Amgen is like a playbook for merging giants who want to defuse the Federal Trade Commission (FTC) or Department of Justice (DOJ) concerns. It’s a strategy that seems to be gaining traction, following a path eerily similar to the Illumina/Grail and Microsoft/Activision Blizzard cases. In both instances, the FTC initially stumbled, and now, they’re locked in appeals battles.
This twist suggests that the FTC might start seeking these conduct-based solutions even when the competitive harm is less than crystal clear, according to Jonathan Lewis, an antitrust heavyweight at Lowenstein Sandler LLP, as he shared with Biospace.
Despite the FTC waving the white flag in the Amgen/Horizon showdown, Maier believes that the pharmaceutical dealmakers should brace themselves for more curveballs. The FTC, as highlighted in Chair Khan’s written statement alongside the Amgen settlement, is on a mission to delve deeper into pharmaceutical markets. They’re out to expose connections between mergers and what they view as anti-competitive practices.
For those navigating the pharmaceutical business, be ready for longer regulatory review timelines in the wake of the FTC’s heightened interest in these markets. Maier couldn’t stress this point enough.
Ongoing FTC Challenges: Pfizer/Seagen
Pfizer’s colossal $43 billion bid to acquire Seagen, making it the biopharma blockbuster of 2023, has attracted the eagle-eyed scrutiny of both the FTC and European antitrust authorities. The stakes are high, and the pressure is on. In July, the U.S. antitrust watchdog raised the ante by demanding additional information in its quest to unravel the intricacies of this mega-merger.
Alicia Dubuc, the FTC’s guardian of competition, left no room for doubt when she declared, “We recognize the need to examine with particular scrutiny proposed mergers that may result in a lessening of competition and higher prices for consumers. We remain diligent in protecting the American public from these potential harms,” as reported by Competition Policy International.
This deal looms as the behemoth of the industry, overshadowing everything since AbbVie’s $63 billion takeover of Allergan in June 2019. If the stars align for Pfizer, they’ll gain access to four green-lighted products and an impressive lineup of antibody-drug conjugate hopefuls. Their vision is To add a whopping $10 billion in annual revenue by 2030 through Seagen’s offerings. The merger’s final act is slated for a grand finale between late 2023 and early 2024, but here’s the catch: Seagen’s major shareholders have already given the green light, leaving the ultimate fate resting in the hands of the FTC.
In the world of merger showdowns, conduct remedies are as rare as diamonds, and they’re far from the preferred solution, according to Lewis. Instead, it’s all about divestitures to address those nagging competitive concerns. Given this shift in strategy, pharmaceutical giants should start rethinking their bundling programs and, perhaps, seek expert guidance on the tangled web of antitrust implications.