On January 13, the FTC voted to close its investigation into the 2001 acquisition of Novazyme Pharmaceuticals, Inc. ("Novazyme") by Genzyme Corporation ("Genzyme"). At the time that the acquisition was consummated, both companies were in clinical stages of testing therapies for Pompe disease using enzymereplacement therapies ("ERTs"). However, neither Novazyme nor Genzyme was actually marketing these types of therapies for the treatment of Pompe disease. Pompe disease is a rare, often terminal, disease that occurs in infants and children. Because the disease is so rare, the Orphan Drug Act ("ODA") governs the approval of these therapies. Under the ODA, unless and until subsequent therapies are proven to be superior treatment options, the first Pompe disease therapy to receive FDA approval obtains seven years of exclusivity to market the drug.
FTC Chairman Timothy Muris drafted a statement supporting the agency's decision, and Commissioner Mozelle Thompson drafted an explanation as to why he decided to disagree with the other three Commissioners on their decision to close the transaction. Instead, Commissioner Thompson was of the opinion that the agency should have issued an administrative complaint, seeking to block the transaction. According to Commissioner Thompson, the consummated merger resulted in a merger to a monopoly in the market for research and development into ERTs used to treat Pompe disease, for which the presumption of anticompetitive effects was not rebutted. Furthermore, Commissioner Thompson reasoned that this "innovation merger" extinguished incentives to compete to develop superior ERT technologies to treat Pompe disease, and that the facts raised some concern about Genzyme's motives in acquiring Novazyme.
In contrast, Chairman Muris stated in the opinion supporting the closing of the investigation that the effects of the merger were uncertain, given the existing failures of firms, including Genzyme, to develop and produce ERT therapies for the treatment of Pompe disease. According to Chairman Muris' statement, even though Genzyme's current clinical trials for the product in development have reached Phase III, a significant number of products that reach that stage of development never receive FDA approval. Chairman Muris also noted the merger may not have negatively affected the parties' incentives to innovate, but could possibly have increased these incentives. In addition, the merger may have made possible many synergies that could result in increasing development of Pompe disease therapies.
Although newly-appointed Commissioner Pamela Jones Harbour abstained from voting because the FTC's review of the merger was in its last stages, she provided her perspective on innovation and antitrust in a separate opinion, expressing some concern given that the merger occurred in pharmaceutical markets where competition to innovate is of utmost importance.
A couple of points relating to this investigation are important to note for those monitoring antitrust policy developments. First, the fact that an investigation occurred is telling in that, once again, it provides evidence that the federal antitrust agencies will look into consummated mergers. Second, the closing of the investigation provides an interesting "twist" in the story to the extent it demonstrates how the agencies will analyze mergers in innovation markets, where products are not currently on the market. The FTC did articulate a theory of potential harm to innovation markets in its complaint accompanying the consent order in Amgen-Immunex, FTC File No. 021 0059. However, that transaction involved other relevant product markets where competition did exist in addition to an innovation market. In contrast, the Genzyme-Novazyme transaction was one where the only relevant product market was an innovation market. Like the products involved in the transaction itself, the FTC's specific theories of competitive harm relating to innovation markets will only be readily available sometime in the future.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.