AstraZeneca Faces UK Antitrust Hurdle in $39B Alexion Acquisition Despite Global Approvals

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On Tuesday, the UK Competition and Markets Authority (CMA) announced that it has launched an antitrust investigation into AstraZeneca's acquisition of Alexion. In a statement, the CMA said it is examining whether the transaction may harm competition "within any one or more markets in the UK."

Currently, the CMA is soliciting public comments until June 3 to inform its assessment and aims to reach a decision by July 21. If, by that date, the CMA identifies any reason to believe there is a "realistic prospect" of a threat to competition, it may initiate a more in-depth investigation. According to CMA rules, a Phase 2 assessment may last 24 weeks, or even 32 weeks, under exceptional circumstances.

For months, industry observers have been closely monitoring the rigor of the U.S. FTC’s scrutiny over transaction decisions. In March of this year, the agency launched a review of its current product-by-product approach to evaluating biopharmaceutical M&A transactions. Last year, the FTC stated that the increase in large-scale deals, such as Bristol-Myers Squibb’s acquisition of Celgene, could result in persistently high drug prices and anti-competitive practices, including delayed payment settlements.

However, to the surprise of pharmaceutical industry observers, the U.S. FTC approved AstraZeneca's acquisition of Alexion last month without raising any concerns. Nevertheless, the FTC's action included cooperation with competition authorities in other countries.

As partner Axinn of Axinn, Veltrop & Harkrider pointed out in a recent interview, in the United States, the FTC must persuade a federal judge to block a transaction, whereas its counterparts in other jurisdictions can independently halt mergers and acquisitions. Therefore, if the FTC and other regulatory authorities (such as the CMA) concur that a proposed transaction would harm competition, the FTC may bypass burdensome legal proceedings and achieve its desired outcome by relying on other jurisdictions to block the deal.

For AstraZeneca, the company has positioned the acquisition of Alexion as a strategic move to establish a strong presence in rare diseases and immunology, rather than its current focus on oncology, cardiovascular, and metabolic diseases. Shareholders of both companies have approved the transaction. AstraZeneca stated that the deal is expected to close in the third quarter.

According to the company, in addition to the United States, the transaction has also been approved by the competition authorities in Brazil, Canada, Russia, and Japan. Alongside the United Kingdom, other key antitrust clearances involve the European Union and China.

The acquisition of Alexion by AstraZeneca was announced in December 2020 as a cash-and-stock transaction valued at approximately $39 billion. According to AstraZeneca’s announcement at the time, the acquisition will strengthen AstraZeneca’s scientific standing in rare diseases and immunology by integrating Alexion’s innovative complement technology platform and robust pipeline. Currently, there are over 7,000 known rare diseases, yet only about 5% have approved therapies. This represents a high-growth, rapidly innovating therapeutic area characterized by significant unmet medical needs.

Alexion's flagship products are two C5 inhibitors, Soliris and Ultomiris, with the latter being a long-acting upgraded version of the former. These two drugs have been approved for multiple ultra-rare disease indications, and their combined sales reached $5.142 billion in 2020. Additionally, the company's pipeline features a portfolio of assets covering multiple therapeutic areas.

AstraZeneca stated that following the successful acquisition of Alexion, it will establish a dedicated business unit, the "Alexion-AstraZeneca Rare Disease unit." This will enable the company to expand its global coverage across primary, specialty, and highly specialized care segments. The company expects to achieve double-digit revenue growth by 2025, double-digit core earnings per share (EPS) growth over the first three years, strong cash flow, and increased dividends.

References:

1.AstraZeneca hits U.K. antitrust roadblock with $39B Alexion buy despite U.S. FTC clearance

2.AstraZeneca receives US clearance of proposed acquisition of Alexion