Antitrust & Competition Life Sciences 2022 Year In Review

M&A activity in the life sciences space proceeded largely as usual in 2022, with most transactions receiving expected levels of agency scrutiny and closing in the normal course despite aggressive rhetoric from new leadership at both agencies. Notably, the government has thus far not applied more novel theories of antitrust harm outside of the tech space, and both agencies have met skeptical judges in other ongoing litigations.

Life Science M&A Activity Has Continued but No Mega Deals Since 2020

Transactions in the life sciences space entered 2022 in an uncertain regulatory position. Although large pharma players started the year with about $1.7 trillion to spend,¹ an era of more aggressive antitrust enforcement loomed, with new leadership at the Federal Trade Commission (FTC) and Department of Justice (DOJ). This may have initially chilled some transactions. There have been no megadeals since 2020 with the possible exception of the recently announced Amgen/Horizon transaction.

But reports of a total collapse in pharma M&A and a wholesale change in antitrust enforcement appear to have been greatly exaggerated. As noted in our previous quarterly updates, business proceeded largely as usual — a trend that continued through the end of 2022. Large pharma players closed several pipeline acquisitions or collaboration agreements (and often clinical or preclinical stage), receiving agency scrutiny in proportion to their assessed antitrust risk.

We expect this trend to continue in 2023. With capital markets still relatively tight, collaborations, licenses, and acquisitions are increasingly attractive for clinical-stage companies. And while we may not see a megamerger, such as Merck’s stalled bid to acquire Seagen,² we believe life sciences M&A will continue to be active. We expect to see peer-to-peer deals designed to optimize pipeline and cash needs, as well as big pharma pipeline acquisitions and licenses, especially in rare-disease treatments.³

That said, 2022 also showed the paramount importance of engaged and well-prepared antitrust counsel for even lower-risk transactions. The FTC staff is generally very engaged – and more than would be expected – during the HSR waiting period, asking many and sometimes hard questions requiring significant preparation for responses. Given the limited time within the HSR process, being ready is critical for the parties to a transaction to avoid a Second Request (and the resulting 6+ month delay in closing). Involving antitrust counsel at the earliest stages of the transaction through substantive (and often pre-emptive) engagement with agency staff can help the parties avoid extensive, costly, and potentially avoidable reviews.

Most Transactions Closed in the Normal Course:

GSK/Sierra: GSK announced its $1.9 billion acquisition of Sierra Oncology on April 12, 2022, with the deal closing on July 1. Sierra’s key asset is momelotinib, a promising JAK inhibitor that is currently undergoing FDA review for treatment of the blood cancer myelofibrosis. GSK has a similar asset, Blenrep, but it targets a different type of cancer (multiple myeloma) and uses a different mechanism of action, and is thus considered complementary to momelotinib rather than competitive. Furthermore, momelotinib will also allow GSK to compete with the primary player in myelofibrosis: Novartis’ Jakafi.
Pfizer/Biohaven: In one of the larger deals last year, Pfizer announced its $11.6 billion all-cash acquisition of Biohaven on May 10, 2022. Biohaven’s core asset is Nurtec ODT (rimegepant), a calcitonin gene-related peptide (CGRP) inhibitor approved for acute migraines in February 2020 and for episodic migraines in June 2021. Given Pfizer’s divestiture of a significant portion of its own neuroscience division in 2018,⁵ Nurtec’s relatively low share in oral migraine medication (5% in 2021),⁵ and the presence of Eli Lilly and other large players in the space, the antitrust risk of the transaction was relatively low. As a result, Pfizer appeared to have little antitrust trouble for the transaction, reporting in a late July 8-K filing that it had received all required antitrust clearances before closing on October 3. The timing gap, however, may indicate that the parties preemptively engaged the agencies.
BMS/Turning Point: Bristol Myers Squibb (BMS) announced its $4.1 billion all-cash acquisition of Turning Point Therapeutics on June 3, 2022, with the transaction closing on August 15. Turning Point’s primary asset is repotrectinib, a midstage candidate as a treatment for non-small cell lung cancer (NSCLC) that targets the ROS1 and NTRK gene mutations. Although BMS has several therapies for NSCLC that are either approved or in development, none of its assets target the ROS1 gene. With the parties making their HSR filings at the end of July and closing in mid-August, the transaction appears to have encountered little agency resistance, although the gap between announcement and filing may indicate prefiling agency engagement to preempt regulatory concerns.
Vertex/ViaCyte: Vertex’s $320 million proposed acquisition of ViaCyte was announced on July 11, 2022, and despite appearing to be one of the riskier deals of 2022, closed in September 2022. The transaction centers around ViaCyte’s stem-cell-based treatment for type 1 diabetes, known as PEC-01. PEC-01 is a form of islet therapy, in which stem cells are grown into pancreatic cells outside of the body. These cells are then implanted into patients, where they mature into beta and other islet cells to monitor glucose and produce insulin, eliminating the need for daily insulin injections. But unlike the other covered deals in 2022, the parties are direct and close competitors. Vertex has a rival islet therapy asset in development (VX-880), and one of ViaCyte’s ongoing trials would eliminate the need for immunosuppression, a key downside of other islet therapies. Third-party reactions reflected the risky nature of this deal, with one analysis stating that Vertex is “clearing out potential competition” and that the two companies’ type 1 diabetes treatments are “neck-and-neck [in] clinical development.”⁶ But despite these issues, Vertex was able to close the transaction two months after signing.
Pfizer/Global Blood Therapeutics: Pfizer’s $5.4 billion acquisition of Global Blood Therapeutics (GBT) was announced on August 8, 2022. GBT is considered a leader in the sickle-cell disease (SCD) space, with its Oxbryta approved in 2019 and several other promising therapies in various stages of its pipeline. Pfizer did not have any significant SCD assets after a Phase 3 failure in 2019 but had an early Phase 1 asset at the time of acquisition. Although the deal may have received agency questions, it closed on October 5 without a protracted delay or noted second request.
Novo Nordisk/Forma Therapeutics: Also in the SCD space, Novo Nordisk announced its $1.1 billion acquisition of Forma Therapeutics⁷ on September 1, 2022. Forma’s core asset, etavopivat, is an oral PKR activator in Phase 2/3 trials indicated for SCD. At the time of acquisition, Novo Nordisk, like Pfizer, had an early-stage SCD asset in its pipeline. But the transaction closed on October 14, less than 1.5 months after its announcement, despite being the third in a series of transactions in SCD (see below) and featuring a minor horizontal pipeline overlap.
Amgen/Horizon: Amgen announced the largest deal of the year — its $28 billion acquisition of Horizon Therapeutics — on December 12, 2022. Unlike many of the transactions listed above, and reflected in the significantly higher price, Horizon has several approved medications and nearly $2 billion in sales through the first nine months of 2022.⁸ Horizon’s primary assets are the thyroid eye disease drug Tepezza, chronic gout treatment Krystexxa, and the neuromyelitis optica spectrum disorder therapy Uplizna.⁹ While little is known about agency reaction, the parties plan to see antitrust clearances in Austria, Germany, and the United States,¹⁰ and the sheer size of the transaction means the parties are likely to face agency questions. But given the relatively short outside date of the agreement (June 3, 2023, extendable to December 12, 2023) and the high reverse-termination fee of approximately $975 million, the parties appear confident they will obtain approval without substantial hurdles.

But CSL/Vifor Shows the Importance of Antitrust Preparation

One notable exception to the “business-as-usual” theme from 2022 is CSL’s acquisition of Vifor, especially when contrasted with the other transactions in the SCD space noted above. CSL first announced its $11.7 billion acquisition of Vifor Pharma on December 14, 2021. The FTC quickly focused on the existing horizontal overlap in the parties’ SCD pipelines and a general horizontal overlap between Vifor’s iron-deficiency hematology franchise and CSL’s blood-plasma portfolio. The agency initiated an investigation into the SCD overlap despite the approval of several new SCD treatments over the past five years and a fairly robust pipeline of other novel therapies (ranging from small-molecule to gene therapy) in development by a number of players. The investigation delayed closing until August 9, 2022, nearly nine months after the announcement of the acquisition.

As noted above and in our Q3 2022 update, Pfizer and Novo Nordisk, both large pharma players, also acquired assets in the SCD space (after the CSL/Vifor transaction) without a prolonged investigation.

Looking Forward

While we predict that 2023 will largely resemble 2022, with business proceeding mostly as usual and deals receiving standard agency scrutiny, at least one senator is keeping a close eye on the life sciences. On January 25, 2023, Sen. Elizabeth Warren (D-MA) penned a letter to the FTC,¹¹ asking the agency to scrutinize the pending Amgen/Horizon and Indivior/Opiant transactions¹² while also calling out consolidation in the pharmaceutical industry generally. Although the agency was probably already taking a close look at the Amgen/Horizon transaction, Warren’s letter is likely to increase public pressure on the FTC to investigate the transaction and continue asking questions in other life sciences deals.

Footnotes

1. (Dec. 1, 2021) available at Get Ready for M&A: Large Biopharma Companies Will Have $1.7T in Dealmaking Firepower Next Year, Analyst Says | Fierce Pharma

2. (Aug. 26, 2022) available at Merck and Seagen Can’t Agree on a Price for Their Rumored Merger: Bloomberg | Fierce Pharma

3. (Dec. 8, 2022) available at Life Sciences M&A Values Halve, Volumes Plunge. Will We Ever See Deals Pick Up Again? | Fierce Biotech

4. Fierce Biotech, “Backed by Bain, Pfizer loads prime CNS assets into new biotech” (October 23, 2018).

5. Fierce Pharma, “Pfizer buys migraine partner Biohaven for $11.6B, betting on CGRP drugs in grand return to neuroscience” (May 10, 2022).

6. Fierce Biotech, “Vertex absorbs ViaCyte and its stem cell-based diabetes treatment for $320M, clearing out competition” (July 11, 2022).

7. Forma Therapeutics was represented by Goodwin. Read more here.

8. Fierce Pharma, “Buyout on Horizon: Amgen floats $28B offer for rare disease drug maker as Sanofi exits bidding war” (Dec. 12, 2022).

9. Id.

10. Amgen Inc. Form 8-K (Dec. 12, 2022).

11. Law360, “Sen. Warren Wants FTC Scrutiny of $29B Pharma Deals” (Jan. 27, 2023).