Amidst a wave of challenges to mergers on novel theories of harm, proposals to revamp both the HSR Filing rules and the Merger Guidelines used for assessing the competitive impact of mergers, and taking steps to enlarge the agency’s enforcement ambit, the Federal Trade Commission’s (FTC’s) most recent action is perhaps the most consequential for life sciences companies. By bringing suit for a preliminary injunction to arrest an Exclusive License between Sanofi, one of the world’s largest pharmaceutical companies, and Maze Therapeutics, a privately held, venture-backed biotech start-up with no FDA-approved products and eager to focus resources on more common diseases, the FTC may be signaling increased scrutiny for transactions that have traditionally been permissible due to the uncertain nature of product development and approval in the pharmaceutical space.

At issue are treatments for Pompe disease, a rare genetic disorder that causes progressive muscle damage and often leads to death. Pompe disease affects approximately 1 in 40,000 people in the United States, and experts estimate an upper limit of 10,000 cases worldwide. Sanofi has been the only supplier of treatments for Pompe disease for over a decade; it introduced Lumizyme in 2010 and Nexviazyme in 2021. Both are enzyme replacement therapies and are administered at clinics via biweekly intravenous infusions. Sanofi charged approximately $750,000 per year for either treatment. There exists a third treatment for Pompe, Pombiliti, introduced by Amicus Therapeutics but approved only as a second-line therapy where Sanofi’s duo failed.

Maze is developing a GYS1 inhibitor drug to treat Pompe disease called MZE001. MZE001 will be a twice-daily oral medicine—an important change in treatment options for Pompe sufferers tired of going to infusion centers. Maze announced positive data from Phase I clinical trials and was poised to begin Phase 2 clinical trials in 2023.

In April 2023 Sanofi and Maze executed a definitive agreement by which Sanofi would get an exclusive license to MZE001. In consideration of the license, Sanofi agreed to pay Maze $130 million in cash, make a $20 million equity investment in Maze when it completes its initial public offering, and pay Maze up to $605 million in future contingent development and commercialization milestone payments, as well as royalties on future sales of the licensed products. Upon announcing the agreement Maze immediately touted the impact that the funding would have on Maze’s ability to continue innovating and investigating new treatments to other serious diseases.¹

Under the antitrust laws, any exclusive license is treated as an asset acquisition and therefore is subject to HSR filing if the financial thresholds are satisfied, which was the case in this license agreement. The FTC reviewed the transaction and initiated an administrative adjudication on December 11, 2023. On this same day, the FTC filed a complaint in federal court in the District of Massachusetts seeking a preliminary injunction during the pendency of the administrative proceeding. The FTC asserted that the transaction constitutes: 1) Monopolization under Section 2 of the Sherman Act (and thus a violation of Section 5 of the FTC Act), and 2) an Illegal Acquisition under Section 7 of the Clayton Act. In particular, the FTC alleged that Maze’s MZE001 is a nascent threat to Sanofi’s existent monopoly power in the market for treatments for Pompe disease.

Sanofi promptly abandoned the transaction following the FTC’s complaint, and Maze is now left without the funds that it anticipated would allow the company to “best apply its expertise and resources, and make the biggest impact for patients, by focusing on” more pervasive ailments such as kidney disease. The FTC’s focus on this single product may result in the delay or outright abandonment of research by Maze that the company can no longer afford without the money it anticipated earning through the Sanofi license.

The FTC’s complaint for preliminary injunction² is heavily redacted, but some of the language suggest that internal documents, especially those of Sanofi, emboldened the FTC. Consider the following:

• “Because MZE001 promises to offer similar therapeutic efficacy but significantly reduce patients’ treatment burden, Sanofi forecast that if MZE001 is approved [REDACTED].”
• “At first, Sanofi attempted to meet this competition by striving to innovate” and “Maze’s development of MZE001 spurred Sanofi to [REDACTED]” and “observing that MZE001 can be administered orally and cognizant of the drug’s commercial promise, Sanofi concluded that it had to [REDACTED].”
• “Internally, Sanofi executives made clear that acquiring MZE001 [] would transform MZE001 from a threat into a shield to protect Sanofi’s monopoly.”
• “Sanofi’s internal models of the Proposed Transaction projected that MZE001 in a rival’s hands could capture as much as [REDACTED].”

Similar language appears in the administrative complaint.³

The lessons from the FTC’s challenge to the Sanofi-Maze Exclusive License are stark. The FTC may treat therapies moving into Phase 2 clinical trials as nascent products that are sufficiently close to commercialization such that they could pose a competitive constraint on incumbents. Typically, the FTC has acknowledged the inherent uncertainty of success in Phase 2 clinical studies and has been less willing to challenge transactions for assets still so far away from commercialization. Moreover, when the FTC believes it has compelling facts in a company’s documents, it may be less likely to entertain arguments that the transaction in question benefits a greater good by allowing the innovator company more resources and flexibility to continue developing new products. A third lesson is the focus on method-of-action, as the FTC emphasized the importance of Maze’s forthcoming oral medicine as an important improvement vis-à-vis Sanofi’s infusion products, though the complaint is not precise about whether the products would be direct substitutes for all patients suffering from Pompe.

Though redacted, the complaint makes clear that the FTC used Sanofi’s internal documents to support its claim that allowing the deal would deprive patients of the benefits of competition. Thus, the final lesson is that companies should be mindful of how statements made in internal documents might be viewed—and used—by regulators.

[1] The Wall Street Journal, “Biotech Startup Maze Therapeutics Strikes $750 Million Deal With Sanofi,” May 1, 2023, https://www.wsj.com/articles/biotech-startup-maze-therapeutics-strikes-750-million-deal-with-sanofi-874d3f99?mod.

[2] https://www.statnews.com/wp-content/uploads/2023/12/ftc-vs-sanofi.pdf.

[3] https://www.ftc.gov/system/files/ftc_gov/pdf/d9422_sanofi_maze_part_3_complaint_public_redacted.pdf.