Analysis Group Authors Apply a Scientific and Drug Development Lens to Evaluating Killer Acquisition Theories of Harm in Biotech Deals

February 12, 2024

Over the past few years, antitrust agencies have challenged multiple deals in the pharmaceutical industry, alleging that the proposed mergers would harm current or future innovation. One rationale behind the agencies’ concerns is the killer acquisition theory – the idea that a larger incumbent acquires a smaller company for the sole purpose of eradicating future competition. In the Law360 article “How Biotech Deals May Help Competition, Despite FTC View,” Analysis Group authors explore the complexities of evaluating killer acquisition theories, given the unique process by which new products are developed and come to market.

The authors – Managing Principal Jee-Yeon Lehmann, Vice President Federico Mantovanelli, and affiliate Michael Scott Kinch (Long Island University) – begin by examining the drug development process, which entails an iterative process that builds on prior knowledge and requires significant investments in time, money, and knowledge. These realities mean that not every company is able to ideate and execute all the activities necessary to bring a drug through the R&D process to the patient. As a result, biotech acquisitions and licensing deals are often necessary for a product to travel the distance from concept to approval. They then explain scientific and technological reasons why a pharmaceutical company might delay or abandon the development of a particular product, all of which require a careful assessment based on objective scientific data. According to the authors, a pharmaceutical company may also acquire a small firm to gain access to know-how (e.g., intellectual property, trade secrets, and experimental data), with the intention of applying it to a more innovative and impactful product.

The authors conclude by highlighting the need for a careful consideration of these features of the biotech industry and drug development process so as to avoid labeling a deal as a killer acquisition when its intended goal may be to foster innovation.

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