New Study Recommends Increased Scrutiny of R&D Collaborations, Licensing Agreements and M&A Transactions in the Pharmaceutical Sector
- 29/11/2024
- News
Yesterday, the European Commission published an important study analysing whether R&D collaborations, licensing agreements or M&A transactions in the pharmaceutical sector may have resulted in the discontinuation of overlapping R&D programs for the development of new medicines.
In the study, conducted by an external consultant, 6,315 transactions or collaborations during the period 2014-2018 were assessed. Of such deals, 240 were identified to involve competitors developing overlapping R&D programs, and 89 involved a subsequent discontinuation of one of the overlapping R&D programs (which did not appear to be explained by safety or technical justifications). While the study is solely based on public information, and does not assess the legality of any transactions or collaborations, it indicates that such deals “warrant further scrutiny” as they may have constituted “killer acquisitions” or may have otherwise led to the discontinuation of competing R&D programs in violation of the competition laws.
Importantly, the study determines that the greatest percentage of deal types meriting further scrutiny were R&D collaborations (40%) and licensing agreements (33%). Such collaborations and licensing agreements typically do not require up-front clearance by competition authorities, and thus have not been subject to the same in-depth scrutiny as faced by recent M&A transactions in the pharmaceutical sector. Nevertheless, such R&D collaborations and licensing agreements remain subject to the competition laws on anticompetitive agreements and abuse of dominance, and may face investigation and sanctions from competition authorities if they are found to unlawfully harm competition.
Following this study, it can be anticipated that the European Commission will increase its scrutiny of R&D collaborations and licensing agreements in the pharmaceutical sector (alongside its existing close scrutiny of M&A transactions). To aid in such scrutiny, the study recommends the introduction of a “registry or notification system” for relevant deals and for any planned discontinuation of R&D programs. Such measures would complement other ongoing efforts by the Commission to challenge below-threshold M&A transactions, including efforts to empower national competition authorities to “call-in” suspicious transactions (and refer such transactions to the Commission).
In this context, pharmaceutical companies should exercise additional caution to ensure that any new R&D collaboration, licensing agreement or M&A transaction is carefully reviewed for compliance with the competition laws (even when no up-front merger notification is required). Particular care is required where the parties may be competitors (or potential competitors) with overlapping development programs (or products) in the therapy area covered by the deal. Companies should also ensure that any existing R&D collaborations or licensing agreements have been adequately reviewed for competition law compliance, especially where they remain ongoing and may lead to the discontinuation of an existing development program.
