The Federal Trade Commission (FTC)’s aggressive approach to mergers and acquisitions enforcement (M&A) is disrupting critical investment in innovation, according to National Venture Capital Association (NVCA) President Bobby Franklin, in an interview with Axios.
“…The FTC’s fixation on M&A is continuing to disrupt the entrepreneurial ecosystem. The result, when added to current market conditions, is leaving startups with fewer exit options and making it harder for VCs to invest in innovative new ideas.”
For small and early-stage life sciences companies, policies that chill investment in new innovation could upset the already high-stakes process of bringing new medicines to patients, particularly considering that:
- 8 in 10 life sciences companies operate without a profit, relying on external investment, including VC, to support new innovation;
- It can cost $2.6 billion and take over 10-15 years to bring a new therapy from initial discovery to an approved treatment for patients; and
- Given that less than 10 percent of promising new medicines that enter clinical trials will make their way to patients, the high risk associated with early-stage R&D means smaller companies are highly reliant on venture support.
Taken together, the FTC’s 2023 Merger Guidelines and recently finalized premerger notification rule place a significant burden on companies engaging in even procompetitive M&A. Federal policymakers must keep the fundamental role of M&A in mind and avoid obstructing this key exit point for investors to be able to continually to support the next generation of treatments and cures.