Overreach in M&A Enforcement: The Impact on Pro-Innovation Deals That Aren’t Ever Pursued

Feb 21, 2024 | Blog Post

In recent months, the Federal Trade Commission (FTC) and Department of Justice (DOJ) have pursued an increasingly aggressive new approach towards mergers and acquisitions (M&A). Taken together, the Agencies’ recently finalized Merger Guidelines and proposed premerger notification rule under the Hart-Scott-Rodino (HSR) Act illustrate a dramatic shift towards greater scrutiny of even procompetitive M&A, which could have a significant impact on innovation.

Notably, this greater scrutiny of proposed transactions is just the tip of the iceberg for the life sciences ecosystem. The Agencies’ new approach to antitrust enforcement ultimately risks preventing potentially pro-competitive deals intended to bring innovative medicines to patients from even being considered.

“…[T]he impact of an aggressive FTC is not only on the deals it stops from closing, but also on the deals that might otherwise have been pursued but never happen.”

Cooley, LLP

The complex path to market for new treatments and cures is marked by significant scientific, regulatory and financial uncertainty. For decades, M&A and other collaborations have helped life sciences companies of all sizes to smooth this path to market, allowing them to combine their complementary resources, skills and expertise to innovate more efficiently and ultimately bring new medicines to patients. Case in point: On the back of 10 years of increased M&A activity, the rolling five-year average of new therapies approved by the FDA more than doubled, with 49 approved in 2022.

Now, by setting a precedent of challenging a less discriminant array of M&A deals, and failing to take account of the procompetitive benefits these deals provide, the Agencies’ recently finalized merger guidelines create a more uncertain future for innovation. Without pro-innovation M&A policy, companies are likely to be deterred from engaging in the very deals that allow them to unlock the resources and expertise necessary to advance the next generation of breakthroughs. The result is that an unforeseen number of promising treatments and cures are likely to stall.

“The . . . guidelines cast a large and perilous shadow upon the future of our ecosystem and threaten to shatter the unity of purpose built within the biopharmaceutical ecosystem. It is through these collaborations and alliances that the burdens of research, the challenges of clinical trials, and the increasing demands of health regulators are shared, and thus the weight of scientific progress made bearable.”


In addition, the FTC’s proposed HSR premerger notification rule is poised to deter even potentially procompetitive mergers, placing immense costs on merging parties by default. A recent survey of antitrust experts estimated that compliance with the new standards would take 241 hours of additional labor, and cost more than $234,000, to complete the required filings under the rule. For the nearly 80% of life sciences companies operating without a profit, these costs are enough to stop a pro-competitive deal, and potentially life-saving innovation, in its tracks.

Finally, by disrupting a carefully designed path for companies to advance new treatments to market, the agencies are also creating significant uncertainty for external investors – like venture capital (VC) – making it harder for companies to access external funding to support new innovations. With the average cost of developing a new medicine exceeding $2.8 billion, such measures that deter this vital investment in bringing new treatments and cures to patients cannot be taken lightly.

“Research shows that acquisitions serve a critical role as an exit strategy for successful innovators and the positive impact VC backed innovation has on consumers and the economy as a whole…A robust M&A market for startups is necessary to maximize incentives and allow for sustainable returns on VC investment.”

National Venture Capital Association

For nearly five decades, policymakers have taken a balanced approach to competition policy that recognizes M&A as a vital bridge for life sciences companies to advance new innovations to patients. Now, with more than 8,000 potential new treatments and cures in the pipeline across dozens of disease areas, the FTC and DOJ must keep patients top of mind and preserve the balanced approach to antitrust enforcement that the life sciences ecosystem depends on.