For life science companies of all sizes, competitive mergers and acquisitions (M&A) serve as a critical driver in bringing new and groundbreaking treatments and cures to market. In a recent article published in Concurrences Law and Economics, economists from Cornerstone Research highlight the many ways in which M&A supports biopharmaceutical innovation. Chief among them: M&A enables companies to specialize in certain research areas or therapeutic approaches, while broadly facilitating the efficient distribution of resources and investment across the ecosystem.
“Jullien and Lefouili show that mergers can have a positive impact on innovation when there are significant knowledge spillovers and when merging firms can benefit from asset complementarities and coordination of research activities.”
– Cattivelli et al, Concurrences Law & Economic Review, 2024 (footnote 10)
For example, early-stage start-ups often bring highly specialized science and the flexibility to pivot quickly and push the boundaries of innovation. Larger, more established firms provide the infrastructure, expertise and experience required to conduct large late-stage clinical trials, manufacture at scale, and deliver doses to patients around the world. The combination of these two companies facilitates the long, complex and costly process of bringing a new medicine from the lab to patients.
“In innovative industries like the pharmaceutical industry, mergers often involve large firms acquiring technologies from smaller, more innovative companies. Studies argue that such technology transfers can spur innovation when firms have complementary assets.”
– Cattivelli et al, Concurrences Law & Economic Review, 2024 (para. 6)
The article contributes to a growing body of evidence demonstrating the unique and fundamental role of M&A in the biopharmaceutical innovation ecosystem. The Federal Trade Commission and Department of Justice must pause to consider the evidence, rather than continuing to pursue an approach to life sciences M&A that risks upsetting this dynamic, world-class ecosystem.
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