3 MULTI-BILLION PHARMA DEALS UNDER REGULATORY SCRUTINY
Large scale pharmaceutical mergers and acquisitions are nothing new in healthcare but three of the latest deals are getting a lot of scrutiny from the Federal Trade Commission.
Pharmaceutical and biotech companies are under heavy pressure to perform commercially for investors and clinically by healthcare customers. As they seek to build profitability and their pipelines, mergers and acquisitions are part of their corporate strategies. Three recent deals underway have drawn the attention of antitrust regulators and watchdog groups; they encompass:
- Abbvie acquiring Allergan: $63 billion
- Bristol-Myers Squibb buying Celgene: $74 billion
- Roche’s takeover of Spark Therapeutics: $4.3 billion
Satisfying Regulators and Public Interest Groups
For antitrust purposes and other reasons, the FTC is digging deep to assess individual attributes and assets of each company separately and how they will align if combined together. In the case of the Roche and Spark deal, the FTC and the United Kingdom Competition and Markets Authority ( CMA ) are both reviewing the buyout.
· Abbvie ( NYSE: ABBV ) based in North Chicago, Illinois and Allergan ( NYSE: AGN) headquartered in Dublin, Ireland have proposed selling off two drugs, brazikumab and Zenpep. Brazikumab belongs to the same IL-23 inhibitor class as AbbVie’s Skyrizi; each are targeting the inflammatory bowel disease ( IBD ) market sector. Allergan’s Zenpep and AbbVie’s Creon are used to treat pancreatic replacement enzymes
· For Bristol-Myers Squibb ( NYSE: BMY ) located in New York City and Celgene ( NASDAQ: CELG ) based in Summit, New Jersey to complete their deal, they are offloading products as well to satisfy regulators. Amgen ( NASDAQ: AMGN ) has stepped forward to buy the drug Otezla from Celegne for $13.4 billion
· As for Roche (OTCQX: RHHBY) headquartered in Basel, Switzerland and Spark ( NASDAQ: ONCE ) located in Philadelphia, Pennsylvania, their deal is hovering as it remains under consideration by regulators
Regulators may require additional action from any of the 6 companies involved in these 3 transactions which potentially could delay or derail plans to bring the companies together.
This is not to say all multi-billion pharmaceutical buyouts involve being stuck in antitrust quicksand. Within the last 18 months Pfizer acquired Array BioPharma for $11.4 billion and Takeda picked up Shire for $62 billion ( the largest acquisition by a Japanese company to date ) with close monitoring by various regulatory authorities but successfully closed in a reasonable amount of time.
Roche is the one of the largest pharmaceutical companies in the world, weighing in with over $57 billion in annual sales. The Spark buy is a strategic bolt-on for them; for Abbvie and Bristol-Myers Squibb, their deals are large scale acquisitions which may involve hefty breakup fees if the transactions aren’t completed.
Healthcare and Pharmaceutical Commercial Strategy
The motives behind the mergers and acquisitions vary and may involve not only replenishing pipelines but also represent opportunities to consolidate operations to reduce costs or enlarge the host company to gain competitive mass, negotiating clout with PBMs, hospitals, health systems, payers as well as debt to avoid takeover. Combining large scale drug producers can easily catapult two top 20 companies into the top 10 based on total sales. For competitors, this is an organizational and product franchise threat. A larger company may have capital resources and contracting strategies that enable it to gain ground against well positioned rivals quickly. For marketers, a product with modest income performance can boost sales with enriched commercial resources and better market access from a larger parent organization.
Once a transaction is completed several challenges emerge including:
- Debt management is paramount; post merger and acquisition debt loads can be a burdensome drag on earnings and future reinvestment
- Developing a new earnings forecast and updated corporate strategy
- Integration of two organizations including staff, IT, facilities, etc.
- Branding, commercial identification of acquired product lines
Business Practice Concerns
Besides overlapping product lines, government agencies and various advocacy groups critique scale and scope of the proposed combined organizations and their business practices. Pharmaceutical and biotech companies deploying controversial contracting and rebate arrangements with payers, steep price increases and intricate patent protection measures are trying to better position themselves against other companies, including generic producers, to maintain and grow income. When these factors are considered as part of the approval requirements and/or public concern, deal-making processes slow down and may or may not add additional costs to the final sale if approved.
We can expect to see other big deals on the horizon especially if larger players have major portions of their income based on one or a very limited number of products.
By good fortune accompanied by possible risk, some pharmaceutical companies have a singular enormously successful product or a flagship product accompanied by other profitable but lesser scale products. Abbvie was one such company with their drug Humira and a portfolio of other products with healthy but smaller sales numbers hence their interest in buying Allergan.
Other companies to consider like this include Merck ( Keytruda ), Amgen ( Enbrel ), Lilly ( Trulicity ) and Gilead ( Biktarvy ) and Biogen ( Tecfidera ). If they cannot find ways to refill their pipelines organically or through smaller scale acquisitions to build revenue streams and profitability, larger scale deals are one of the primary strategies considered along with aggressive cost cutting measures.
Thank you for reading this article. Check out my other stories about healthcare advancements, technology, digital marketing, social media strategy and my healthcare industry website:
A Healthcare Industry Resource for…
- healthcare marketing and digital marketing strategy
- business intelligence, investment community
- managed care, managed markets, market access
- sector-focused healthcare industry insights
- career development, job searches, academics
Connect with me at LinkedIn and Twitter…
I lead healthcare marketing initiatives in competitive sectors spanning pharmaceutical, medical device technology, clinical programs, health services, healthcare RPA ( robotic process automation ), software, SaaS and managed care. I am from a healthcare family ( 20+ credentialled medical professionals ) and have 20+ years’ experience in the healthcare industry advancing patient care and achieving commercial goals.
· Numerous medical specialties and sectors including hospital, health system, IDN, MTF, surgery center, LTC, dialysis, oncology, pharmacy ( retail, mail, compounding, specialty ), GPO, distributor, wholesaler, consumer / patient, employers, benefit consulting and payers ( MCO, BCBS, PBM, Medicaid, Medicare, DHA / TRICARE )
· Digital marketing, SEO, content development, email marketing, PPC, clinical/promotional print and digital collateral, brand management, product management, market research, segmentation, marketing / sales collaboration, corporate communications, budgeting, forecasting, vendor management, managed care, market access
· Healthcare programs, services, pharmaceuticals, medical device technology, wireless EHR connectivity, disposables, software, SaaS, RPA ( Robotic Process Automation )