Bipartisan policymakers continue to raise concerns about the recently finalized 2023 Merger Guidelines and their impact on early-stage companies. Last week, the House Committee on Small Business wrote to the Federal Trade Commission (FTC) and Antitrust Division of the Department of Justice (DOJ), emphasizing that the merger guidelines “threaten to deter M&A transactions before they even get off the ground,” chilling a critical pathway for small companies.
“These new guidelines will have a significant impact on small businesses—nearly half of which look to mergers and acquisitions (M&A) to grow—but it seems the FTC and DOJ failed to properly consider the impact the new Guidelines will have on small businesses…. The FT[C] and DOJ present these Guidelines as providing transparency and reflecting a modern market reality, but it is clear they further an aggressive enforcement agenda that will deter dealmaking.”
– Committee Chair Rep. Roger Williams (R-TX) and Ranking Member Rep. Nydia Velázquez (D-NY)
Deterring M&A poses a particular threat to the life sciences ecosystem, which is made up of thousands of small, early-stage companies taking enormous risks in the pursuit of therapeutic discoveries for patients.
“America’s small biotechs lead the world in innovation and R&D spending. Consequently, we are also responsible for an increasing number of new medicines, producing more than the rest of the world combined…. According to a recent study on the competitiveness of the U.S. biopharmaceutical industry, 81 percent of the world’s top small research-intensive companies are domiciled in the United States with biopharmaceutical companies representing 91 percent of total R&D spending.”
– BIO
M&A is a fundamental component of the United States’ world-class life sciences ecosystem. Like passing a baton in a relay race, M&A allows smaller companies to use their specialized expertise and nimble structure to incubate discoveries, and then leverage the resources and infrastructure of larger, more established firms to conduct late-stage clinical trials, secure regulatory approval and ultimately develop and deliver medicines at scale. M&A also helps smaller life sciences companies secure the external investment they rely on to help them progress and hand off the baton.
“The proposed Guidelines hindering these options is a looming threat that this exit strategy may no longer be available and will limit access to venture and other capital, thereby limiting innovation and growth.”
– Committee Chair Rep. Roger Williams (R-TX) and Ranking Member Rep. Nydia Velázquez (D-NY)
The Committee on Small Business has asked the FTC and DOJ to provide documentation of how small business interests were considered in the drafting process of the 2023 Merger Guidelines. As the Agencies consider their response, it’s critical that they acknowledge the unique and differentiated market dynamics that drive the life science ecosystem and its many small and early-stage companies across the country.