Your Friend, the FTC: Nastech Solves a Knotty Anti-Trust Problem
When the FTC forced Pfizer/Pharmacia to divest Nastech's nasal apomorphine--a potential competitor of Pfizer's Viagra--Nastech managed what may be a unique solution: it got the product back, with additional financing-and in so doing, solved the very different problems of Pharmacia, Pfizer, the FTC, and itself.
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At the top of the industry, consolidation has frozen out much additional M&A; horizontal mergers among large companies have become much more difficult to get through regulatory authorities as the industries themselves have consolidated. In medical devices, M&A is at a 10-year low, reflecting a paucity of high-value small-company opportunities. Perhaps as important, some successful big-company development programs undermine a basic assumption of medical device investing: that big companies must source innovation from small ones, usually through acquisitions. Meanwhile In biotech, the number and value of M&A is down, despite the apparent logic of consolidation and the unprecedented willingness of sellers to accept low valuations. The key problem is that there are few buyers: those without extremely strong balance sheets aren't willing to take on additional burn rates, having seen some acquirers come to grief as their new, apparently stronger companies are unable to raise money in this bear market.
We have heard of current cases in the drug industry in which the Federal Trade Commission is trying to predict the regulatory future. If the FTC is using its predictive powers as the basis for anti-trust decisions going forward, as appears at least in part to have been the case when it announced its intention to block the proposed merger between cervical cancer screening companies Cytyc and Digene, we find the reasoning problematic, and philosophically troubling.
As pharmaceutical mega-mergers continue, so too do FTC-driven product divestitures by those merged companies, as businesses that formerly competed in given markets combine into potential monopolies. We look at the terms of some notable product divestitures completed to attain FTC approval of a pending merger.