Investors are assessing the impact of the U.S. Federal Trade Commission’s (FTC) lawsuit against Amgen Inc’s proposed $27.8 billion acquisition of Horizon Therapeutics Plc. The lawsuit has raised concerns that other big deals in the drug sector could face similar challenges.
Shares of Seagen Inc, which Pfizer Inc agreed to acquire for $43 billion in March, dropped 6% on concerns that U.S. regulators could challenge this combination as well. Smaller biotech firms that are waiting for deals to be completed, including Prometheus Biosciences Inc and IVERIC bio Inc, posted narrower stock losses of between 1% and 2%.
The FTC said it opposed the Amgen deal because it was concerned that Amgen could use rebates to pharmacy benefit managers in exchange for promoting Horizon’s two key products, to the detriment of rivals seeking to compete on price. Seeking to thwart a deal based on the potential for this “bundling” practice is a novel approach that regulators had not previously deployed in antitrust cases.
Analysts and legal experts said this line of attack stood a strong chance of being shot down in court. However, the prospect of other deals facing regulatory challenges has spooked investors, with their focus on Seagen, a major cancer drug developer.
Smaller pharmaceutical acquisitions are expected to fly under the radar of regulators, which is why the shares of such companies that have pending deals dropped much less on Tuesday. Investors and analysts are hoping that this will continue to be the case, with consolidation focus shifting to smaller and earlier-stage biotech companies.