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A merger between Biogen Idec and a Big Pharma company could include some divestitures or licensing deals in order to pass muster with the Federal Trade Commission, antitrust attorneys say.
The Massachusetts-based company announced last week that it was up for a sale. Its broad portfolio includes drugs for cancer, multiple sclerosis, rheumatoid arthritis, and heart failure - lucrative areas in which potential bidders are also likely to be invested.
Pfizer, for instance, markets multiple sclerosis drug Rebif with partner Merck Serono; the drug is a direct competitor with Biogen Idec’s Avonex - both are interferon beta 1-a products. With only three other drugs in the category - including Biogen Idec’s Tysabri - a merger between the two companies could raise a red flag at the Federal Trade Commission.
A potential overlap changes the calculus of a deal, because the bidder must decide whether the overall value of the transaction outweighs the costs and lost revenue of divesting the overlapping asset, according to Mit Spears, former General Counsel to the FTC, who is now a partner at Ropes & Gray, specializing in pharmaceutical antitrust issues.
”When you have one of these issues, it’s pretty straightforward what you do,” Spears said. ”If you can’t show there’s adequate competition in the market … fix-it-first remedies are very, very common.”
A possible solution for Pfizer, for instance, might be to sell its stake in the co-promotion deal with Merck Serono.
”Divestitures are by far the favored remedy of regulators,” said Matthew Sawchak, an antitrust attorney at Ellis & Winters. He noted that other options might include ”conduct remedies” such as pricing or research agreements - but they’re not preferred. ”US federal regulators want to avoid these conduct remedies; they require constant monitoring.”
Michael Knight, a former antitrust investigator at the FTC and a partner at Cooley Godward Kronish, pointed to last year’s merger between Allergan and Inamed. Both companies held a botulinum toxin type A product in their portfolios: Allergan’s marketed Botox and Inamed’s Phase III candidate Reloxin.
In order for the deal to move forward, the FTC Consent Order required Allergan to divest development and distribution rights for Reloxin to drug firm Ipsen.
Knight added that the FTC might insist on approving an ”upfront buyer” ahead of a merger ”to ensure to the greatest extent possible that the divestee will be a viable competitor in the future.” The agency could also require short-term supply and manufacturing agreements for the divested product (to ensure an uninterrupted supply) and arrangements to hire key personnel, he noted.
”Every deal gets scrutinized very closely,” said Mark Ostrau, a partner at Fenwick & West, adding that there has been more activity in recent years during the first 30 days of a deal.
He noted that both Johnson & Johnson and Boston Scientific faced antitrust concerns in their respective bids to buy Guidant; all three companies manufacture heart stents. ”The remedy in both cases was fairly similar,” involving technology licensing deals, he said.
Spears noted that antitrust concerns can usually be solved satisfactorily. ”The pipeline issue is something that’s not new to the FTC,” he said.
Biogen Idec has a market cap of USD 22.83bn. Pfizer has a market cap of USD 170.6bn.
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