This table summarizes some of the largest fines from the European Union on companies for a variety of violations.
Illumina, the world’s largest gene sequencing company, faces a record fine from the E.U. for acquiring startup Grail without approval. The $8 billion deal closed in August 2021 despite ongoing EU. and U.S. investigations. A year later, the EU prohibited the merger, citing reduced innovation and choice. The expected $453 million fine, which would be the largest ever in the E.U. that aims to deter unauthorized deals. The chart on the right shows some of the most substantial fines in EU history.
Francis deSouza resigned as CEO and director of Illumina Inc. on June 11, 2023. The company named Charles Dadswell, senior vice president and general counsel, as interim CEO, while the board conducts a search for a new CEO.
Grail’s pioneering work on early cancer detection through blood tests puts it at the forefront of oncological research. But Illumina’s attempt to acquire the firm is now a cautionary tale for the life sciences, as FT reported.
The Illumina-Grail controversy could put pressure on M&A deal size
The substantial penalties that Illumina faces may catalyze the recent shift in pharma M&A, nudging companies toward smaller and more strategic deal sizes. Already, the total valuation of M&A deals in the pharma sector has dipped, now registering in the single-digit billions in May and June. The valuation of M&A deals peaked in March with Pfizer’s purchase of Seagen for $43 billion, bringing total activity to close to $46 billion.
Pharma M&A activities in Q2 2023 indicated a downward trend in deal sizes, signifying a possible shift in acquisition strategies. Notable acquisitions, such as Lilly’s acquisition of Sigilon and DICE Therapeutics, and Shionogi’s acquisition of Qpex Biopharma, exemplify the move towards smaller, strategic deals.
FTC increasing enforcement activity in life sciences
In 2023, there has been an increase in U.S. case law and pharmaceutical antitrust pressure. This includes antitrust claims under the rule of reason test the U.S. Supreme Court announced in FTC v. Actavis for innovator and generic settlements of pharmaceutical patent litigation involving alleged reverse payments or ‘pay-for-delay’; innovator pharmaceutical companies face product-hopping antitrust claims that introduce new versions of brand-name drugs facing generic competition; and legislators, regulators and courts drive pharmaceutical pricing developments involving legislation, regulations and legal challenges.
In April, FTC concluded that Illumina’s Grail acquisition was “likely to substantially reduce competition” in the U.S.
Recent enforcement activity indicates the FTC is prepared to move from rhetoric to action in the life sciences space, at least for the very largest transactions. The agency had previously cleared all life sciences transactions involving therapeutics (with the notable exception of consolidations in generics), but on May 16, 2023, the FTC announced that it had filed a lawsuit to block the Amgen/Horizon transaction. There is also increasing scrutiny on pharmacy benefit managers (PBMs).