The FTC announced yesterday that it would seek to block Sanofi’s proposed exclusive license agreement with Maze Therapeutics, having concluded that the transaction would “eliminate a nascent competitor poised to challenge Sanofi’s monopoly in the Pompe disease therapy market.”¹ In response, Sanofi announced its intention to terminate the transaction. ²  As explained below, the FTC’s action here fits squarely into its “killer acquisition” framework and represents a significant shot across the bow for the pharmaceutical industry. 

As noted in our Q3 2023 Quarterly Update, the FTC has consistently voiced significant concern over “killer acquisitions,”³ deals in which entrenched pharmaceutical companies buy assets allegedly for the purpose of eliminating future competition.  In several transactions, FTC staff explored the factual issues relevant for such a “killer acquisition” theory even as the assets at issue were very early-stage/high-risk, or involved a therapeutic area where the buyer already faced significant competition.  Based on the complaint and related press release, the FTC seems convinced that the proposed Sanofi/Maze transaction fits the “killer acquisition” narrative. 

Sanofi originally announced the $750 million ($150 million upfront) exclusive license of Maze’s glycogen synthase 1 (GYS1) program, focused on Pompe disease, on May 1, 2023.⁴ Pompe, a rare genetic disorder that causes progressive weakness to the heart and skeletal muscles, has limited treatment options.  While Sanofi was an “established player”⁵ in the Pompe space, in particular with its recently approved Nexviazyme intravenous treatment, Maze held a promising Phase 1 asset (MZE001).

In both its complaint and press release, the FTC characterizes Sanofi as the “monopolist supplier of drugs used to treat Pompe disease.”⁶ The agency alleges Maze’s key asset, MZE001, notably referred to as “Phase 2-ready,” “threatens to undermine [that] monopoly.”⁷ As a result, Maze was poised in the future to “capture substantial market share from Sanofi” or “potentially replace Sanofi’s treatments as the standard of care for Pompe altogether,” in particular due to its more patient-friendly mode of administration (oral vs. Sanofi’s IV infusions).  Recognizing this risk, the FTC alleges that Sanofi “is now trying to buy out Maze rather than compete with it,” characterizing the proposed exclusive license as a “monopolist seeking to eliminate a nascent threat to its monopoly.”⁸ As is often the case, the FTC appears to have found supporting evidence in the parties’ ordinary-course documents, mentioning that “Sanofi singled out MZE001 as a significant threat to its lucrative Pompe monopoly shortly after Maze publicly revealed its development plans in 2021.”⁹ 

Although the FTC has publicly espoused the killer acquisition theory before, it is nevertheless surprising to see the agency actually challenge a narrow deal involving such early-stage assets.¹⁰ While prior enforcement actions in the life sciences space have focused on mega-mergers (i.e., BMS/Celgene) or those involving commercial assets (i.e., Amgen/Horizon), the challenge here is closer to some of the recent enforcement in the tech space that focused on potential competition, such as the FTC’s failed challenge to the Meta/Within transaction.

Given that Sanofi has already announced its intention to terminate the transaction, we likely will not get to see how the agency’s theories would play in front of a court.  Based on the press release and complaint, however, the FTC’s theory appears highly speculative.  First, the lead asset in Maze’s Pompe pipeline (and specifically highlighted by the agency) has yet to enter Phase 2 trials.  Second, the FTC’s complaint implicitly assumes that Maze can in fact commercialize its Pompe asset and compete on its own.¹¹ In other words, the agency is alleging that not only will MZE001 successfully pass through rounds of clinical trials and regulatory scrutiny, but also that Maze (a clinical life sciences company) will be able to successfully commercialize the asset.  Third, the agency’s timeline of harm likely extends several years into the future – an often dubious proposition for an antitrust enforcer.  It is worth noting that there are other Phase 1 and preclinical assets with similar mechanisms of action being pursued by other competitors, which the FTC largely dismisses due to Sanofi and Maze being “particularly close competitors.”¹²   

At bottom, the FTC’s challenge is notable for several reasons.  First, it shows the agency has life sciences in its crosshairs (with two challenges in 2023 alone) and is closely examining all life sciences transactions – even ones involving early-stage assets that might have previously cleared without enforcement (or even a significant investigation).  Second, it shows the FTC is starting to apply potential competition and other more novel theories of harm to the life science space and is willing to reach deep (early) into the pipeline of transacting parties to identify substantive concerns.  Third, it represents further confirmation that the FTC gives significant weight to ordinary-course documents, especially those that support its theories.¹³ By contrast, it appears the agency has given very little credence to the palpable procompetitive effects in having a sophisticated player like Sanofi shepherd an early-stage asset through the regulatory approval process and having an established commercialization team launch and promote MZE001.  

The FTC’s likely reliance on more speculative theories of harm for early-stage assets suggests a more careful assessment of the execution risk and its allocation and management in transactional documents.  Similarly, parties need to consider the reactions by KOLs and other stakeholders in the disease state before assessing the regulatory risk.

^[1] FTC, FTC Seeks to Block Sanofi’s Acquisition of Rare Disease Drug that Threatens Sanofi’s Monopoly (Dec. 11, 2023), available at https://www.ftc.gov/news-events/news/press-releases/2023/12/ftc-seeks-block-sanofis-acquisition-rare-disease-drug-threatens-sanofis-monopoly (“FTC Press Release).
^[2] Sanofi, Statement on FTC Challenge to Proposed License Agreement With Maze Therapeutics (Dec. 11, 2023), available at 2023-12-11-21-08-20-2794272-en.pdf (sanofi.com)
^[3] See FTC/DOJ, The Future of Pharmaceuticals: Examining the Analysis of Pharmaceutical Mergers (FTC-DOJ Workshop Summary) (May 31, 2023) (“FTC Chair Khan emphasized the life and death stakes of creating the right competitive conditions in the pharmaceutical sector. Chair Khan noted the importance of ensuring that companies are incentivized to innovate and to make their pharmaceutical products available at affordable prices. She expressed concern that the median list price for new drugs has been increasing in recent years, that “killer” acquisitions shut down potential competitors, and that lawsuits have been alleging illegal bundling and tying practices in the industry”); see also FTC/DOJ, 2023 Draft Merger Guidelines (July 19, 2023) at pp. 19-20 (“A nascent threat to a dominant firm is a firm that could grow into a significant rival, facilitate other rivals’ growth, or otherwise lead to a reduction in dominance.  In assessing a merger that eliminates a nascent threat, the Agencies examine the merger’s tendency to create a monopoly under Section 7 of the Clayton Act.  . . . For example, under Section 2 of the Sherman Act, a firm that may challenge a monopolist may be characterized as a “nascent threat” even if the impending threat is uncertain and may take several years to materialize”), available at https://www.ftc.gov/system/files/ftc_gov/pdf/Future of Pharma Workshop -- Summary.pdf (“Draft Guidelines”).
^[4] Fierce Biotech, Sanofi Bets $750M to Enter Glycogen-Lined Maze Deal With Lead Asset Waiting in the Middle (May 1, 2023), available at https://www.fiercebiotech.com/biotech/sanofi-bets-750-million-enter-glycogen-lined-maze-lead-asset-waiting-middle. 
^[5] BioSpace, Sanofi Deepens Pompe Disease Focus with $150M Maze Partnership (May 2, 2023), available at https://www.biospace.com/article/sanofi-deepens-pompe-disease-focus-with-150m-maze-partnership/
^[6] FTC Press Release; In re Sanofi and Maze Therapeutics, Federal Trade Commission v. Sanofi, Genyzme Corporation and Maze Therapeutics, Complaint for Preliminary Injunction Pursuant to Federal Trade Commission Act § 13(b), Case 1:23-cv-13046 (D. Mass.) (“Complaint”), available at https://www.law360.com/articles/1776090/attachments/0.
^[7] FTC Press Release.
^[8] Complaint at p. 2.
^[9] FTC Press Release, Complaint at pp. 20-21.
^[10] Maze referred to the challenge as “unprecedented” and the “first time ever the FTC has moved to block a license of a Phase 1 investigational medicine.”  Maze Therapeutics, Maze Therapeutics Announces FTC Action Seeking to Block Collaboration and License Agreement with Sanofi Regarding MZE001, a Potential Oral Substrate Reduction Therapy for Pompe Disease (Dec. 11, 2023), available at https://www.businesswire.com/news/home/20231211835372/en/Maze-Therapeutics-Announces-FTC-Action-Seeking-to-Block-Collaboration-and-License-Agreement-with-Sanofi-Regarding-MZE001-a-Potential-Oral-Substrate-Reduction-Therapy-for-Pompe-Disease.
^[11] Complaint at p. 22 (“If Sanofi did not acquire MZE001, MZE001 would continue development as part of Maze, an independent player already engaged in the business of developing a Pompe Drug and working diligently to commercialize it.”)
^[12] Complaint, at p. 26.
^[13] See FTC/DOJ, 2023 Draft Merger Guidelines, Appendix 1: Sources of Evidence (July 19, 2023) (“Evidence that the merging parties intend or expect the merger to lessen competition, such as plans to coordinate with other firms, raise prices, reduce output or capacity, reduce product quality or variety, lower wages, cut benefits, exit a market, cancel plans to enter a market without a merger, withdraw products or delay their introduction, or curtail research and development efforts after the merger, can be highly informative in evaluating the effects of a merger on competition.  The Agencies give little weight, however, to the lack of such evidence or the expressed contrary intent of the merging parties”), available at https://www.justice.gov/d9/2023-07/2023-draft-merger-guidelines_0.pdf

[View source.]