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M&A crackdown is ‘disaster’ for pharma, warns Pfizer executive

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A senior Pfizer executive has warned that a crackdown on mergers and acquisitions by antitrust regulators would be a “disaster” for the innovation system that underpins the pharmaceutical industry.

William Pao, chief development officer at Pfizer, said M&A is an important part of the funding ecosystem that supports scientists’ development of innovative therapies.

“I think it will be a disaster for the system,” he said Wednesday when asked what impact a tightening of the antitrust regime would have on the industry.

“If you can’t get those mergers and acquisitions [deals] and then distributing those molecules all over the world, it sure stifles innovation,” said Pao, who heads the Pfizer arm responsible for the clinical development of drugs and ensuring a pipeline of new therapies.

His comments came after the US Federal Trade Commission filed a lawsuit on Tuesday to block Amgen’s $28 billion acquisition of Horizon Therapeutics. It was the first time in more than a decade that the US competition regulator tried to stop a deal in the pharmaceutical sector.

Analysts have warned that the FTC’s action threatens to upend a decades-old business model pursued by big pharmaceutical companies, which often rely on buying small- and mid-sized biotech groups to replenish their drug pipelines.

“The FTC filing a lawsuit to block this deal will dampen M&A enthusiasm across the biotech sector, particularly given the lack of direct portfolio overlap between Amgen and Horizon,” said Matt Phipps, an analyst at William Blair. an investment bank.

Several analysts said Pfizer’s proposed $43 billion buyout Seagenannounced in March, it could also be threatened by the FTC.

Pao, speaking at the Financial Times US Pharma and Biotech Summit in New York, said he was confident the FTC will approve the Seagen deal. Pfizer on Tuesday raised $31 billion in a massive bond sale that will help finance the acquisition.

Earlier in the conference, Amgen Chief Executive Officer Robert Bradway expressed confidence that his firm would be able to close the Horizon acquisition despite opposition from the FTC.

Amgen and Horizon have both said they will try to fight the FTC in court to complete the transaction.

The FTC has argued that Amgen could use the discounts it pays on its “blockbuster” drugs to pressure insurance companies and drug benefit managers into paying for two of Horizon’s drugs: Tepezza for an autoimmune condition affecting the eyes and Krystexxa for a rare type of gout.

If Amgen were to own these drugs and use its market leverage to get taxpayers to cover them, it could deter other companies from launching rival drugs that would ultimately drive down their price, the FTC said. Tepezza costs about $350,000 for a six-month course of treatment, while an annual supply of Krystexxa costs $650,000, according to the agency.

Pfizer’s bond deal on Tuesday was the fourth-largest of its kind, Dealogic show numbers. The backlog totaled about $85 billion, according to people familiar with the details.

The eight-part loan, with maturities ranging from two to 40 years, surpassed Amgen’s $24 billion issuance in February. Under the terms of the bond sale, if the Seagen deal fails to close in time, or fails, Pfizer will buy back most of the tranches of the notes and reimburse investors. But two of the bonds – maturing between 10 and 30 years – will not be subject to those requirements.

Dan Mead, head of the investment-grade syndicate at Bank of America — a lead bookrunner on the Pfizer bond sale — said “it’s not uncommon to see him for funding.”

“Issuers will often have financing needs in addition to M&A financing, where they may want to continue to have that outstanding debt if, for whatever reason, the merger or acquisition does not go ahead,” Mead said.


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