Trump’s return to the White House will mean a shift in personnel at the US Federal Trade Commission (FTC), which could mean more biopharmaceutical M&A deal activity in the country, an analyst has said.
Considering the likely changes under the incoming Trump administration, GlobalData business fundamentals analyst Alison Labya commented: “A change in FTC leadership may encourage more M&A deals by large biopharmaceutical companies, as well as create a more favourable environment for smaller biotech companies to exit via acquisitions.”
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The FTC’s role is to protect competition across US markets through the enforcement of antitrust laws. Trump is likely to replace its current chair Lina Khan, under whom M&A activity (in biopharmaceuticals and beyond) has seen increased scrutiny.
FTC under Khan
One pharmaceutical merger stopped by the FTC was Sanofi’s $750m licensing agreement with US-based biotech Maze Therapeutics, which has shared positive Phase I results for its glycogen synthase 1 inhibitor MZE001, an orally administered Pompe disease drug to be taken at home.
Sanofi’s own Pompe treatment requires intravenous administration by a healthcare provider and costs around $750,000 for a year of treatment. In a statement, issued by Khan and Federal Trade Commissioner Rebecca Kelly Slaughter, the FTC claimed that Sanofi was “seek[ing] to buy out those competing treatments directly, eliminating the competitive pressure to innovate and offer more affordable drugs”.
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By GlobalDataFollowing the FTC’s lawsuit, Sanofi terminated the licensing agreement and the complaint was dropped.
However, Khan’s three years as FTC chair have earned her the reputation of being too tough. A report by the Committee of Oversight and Accountability published in October found that “Chair Khan seems committed to using all the FTC’s powers to throw sand into all the possible gears over proposed mergers, thereby halting many mergers by abuse of process and chilling other potential mergers from even being suggested”.
FTC with a Trump pick
Likely new agency leadership under Trump could well choose to unpick the Democrat-commissioner-approved 2023 guidelines, which reduced the Herfindahl-Hirschman Index (HHI) thresholds required for transactions to trigger a presumption of competitive harm. The FTC may therefore swing to a period of less rigorous antitrust scrutiny, at least in horizontal M&A.
Regardless, businesses are preparing for a period of increased focus on domestic priorities. In his first term, Trump enacted the Foreign Investment Risk Review Modernization Act, which granted US regulators greater authority to review and block foreign M&A activity, both in biopharmaceuticals and beyond.
Labya explained: “It remains uncertain whether Trump’s ‘America First’ foreign policies will pose challenges for companies outside of the US, especially those headquartered in China, looking to acquire US-based biopharmaceutical companies.”
Trump has also made clear that he plans to impose heavy tariffs – “the most beautiful word in the dictionary”, he said – on imports. He has proposed a 60% tariff on goods from China and 20% on other countries. As a result, biopharmaceutical companies outside of the US may look to acquire US facilities to manufacture drugs domestically.
However, Labya also warned that while some Trumpian policies may increase M&A activity, others risk deterring investors, quashing crucial biopharmaceutical innovation: “Furthermore, Trump’s plans to appoint Robert F Kennedy Jr – a known anti-vaccine advocate and critic of the FDA – as the head of the US Department of Health and Human Services may create challenges for future US drug approvals, which could dampen investor confidence and slow innovation in the biopharmaceutical industry.”
