FTC, in unusual move, leads Sanofi to terminate a drug research deal

Dive Brief:

• Sanofi terminated a licensing deal with biotechnology company Maze Therapeutics Monday after the Federal Trade Commission filed a lawsuit alleging that the collaboration was designed to extend the French drugmaker’s monopoly in treating a rare disorder known as Pompe disease. 
• The scuttled deal came on the same day that the regulator gave final clearance to Pfizer’s $43 billion acquisition of Seagen, which had faced close scrutiny from the antitrust regulator. To ease the FTC’s concerns, Pfizer has agreed to donate royalties from sales of the cancer drug Bavencio to the American Association for Cancer Research.
• The FTC’s challenge to Sanofi, and Pfizer’s donation, are the latest sign of the regulator’s interest in cracking down on deals it sees as anticompetitive as well as its embrace of new theories of how consumers could be harmed by them. But industry executives and investors have warned that tighter scrutiny could threaten dealmaking as well as critical funding for drug startups.

Dive Insight:

The lawsuit to stop a collaboration for an experimental drug in early testing was unusual. In the past, the FTC has largely been focused on overlaps between marketed or late-stage drugs. When it believed combinations could lead to higher prices or fewer products, the regulator would force companies to divest one or more of those assets.

However, FTC leaders have signaled in recent years that they are expanding their views of how consumers can be harmed by combinations involving drugs in earlier stages of development. Threatening to block Sanofi’s deal with Maze is a prime example. 

Sanofi already markets three treatments for Pompe disease, while Amicus Therapeutics has a medicine for those whose symptoms aren’t improving on drugs like Sanofi’s. Maze, a venture capital-backed startup, has been developing a different type of treatment. Like other young biotechs, it forged a pact with a large pharmaceutical partner, Sanofi, to help fund the costs of development. The May deal handed Maze $150 million in cash and equity investment, and could have resulted in up to $750 million in total payouts. 

In signing the deal, Maze said it believed Sanofi’s experience in treating Pompe patients would help it successfully bring the treatment to market.

The FTC viewed the transaction differently, claiming the deal would “eliminate a nascent competitor poised to challenge Sanofi’s monopoly in the Pompe disease therapy market.” Licensing the drug also would “reduce innovation competition to develop new Pompe drugs.”

In so doing, the FTC appears to be embracing theories of consumer harm that economists have developed in recent years. One such theory is that a research deal like Maze’s could discourage other drugmakers from researching new Pompe medicines, while another is that an early-stage project is less likely to advance if it’s in the hands of a big company with overlapping treatments.

The Maze deal “threatens to deprive patients of a new, innovative treatment and maintain a status quo of exorbitant pricing for essential life-saving medicines,” said Nate Soderstrom, acting deputy director of the FTC’s Bureau of Competition, in a statement.

Rather than challenge the FTC’s lawsuit, Sanofi decided to terminate the deal instead. In a statement, Sanofi said the “delay associated with a long litigation” led it to conclude that “it would not be in the best interests of patients to contest [the lawsuit].”

“The Maze partnership was designed to apply Sanofi’s resources, knowledge, and expertise to accelerate the development of [Maze’s medicine], with the hope of addressing unmet medical needs for this devastating condition,” Sanofi said in a statement.

In a separate statement, Maze CEO Jason Coloma called the FTC’s challenge “unprecedented.”

“We entered into this deal with Sanofi because we believed, and continue to believe, that Sanofi has the optimal resources, expertise and motivation to advance the program forward,” and that its stewardship “is in the best interest of patients suffering from Pompe disease,” he said. 

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