2.1 The FTC vs. Sanofi. Stifling innovation or smashing monopolies?

In its own words, the U.S. Federal Trade Commission’s opposition to a licensing deal between Sanofi and the biotechnology firm Maze Therapeutics, “is a case about a monopolist seeking to eliminate a nascent threat to its monopoly”.  

Cue howls of complaint by VC’s and public market investors that government scrutiny is preventing innovation. True enough, acquisitions, mergers and licensing transactions between biotech companies and bigger biotech or pharma companies are the lifeblood of the sector. 

On the other hand, no one wants a big pharma company to acquire close to a monopoly position where it is virtually the only one selling drugs for that indication, physicians only see one company as the provider of therapeutic solutions and, potentially, patients and payers are harmed by higher monopoly prices. 

Through its Genzyme subsidiary, Sanofi controls the market for drugs for Pompe disease, a genetic condition arising from a partial or total deficiency in an enzyme, alglucosidase alpha, which breaks down glycogen into glucose. Its absence leads to damaging accumulations of glycogen, which causes severe muscle weakness, cardiac abnormalities, and respiratory problems.  It markets two enzyme replacement therapies (ERTs), which are designed to substitute for the missing enzyme. 

These cost about $750,000 per year and need to be administered by intravenous infusion twice per week. Maze Therapeutics had completed a phase 1 trial with an oral glycogen synthase inhibitor, designed to reduce the normal production of glycogen. That was enough to compel Sanofi to pay it $130 million upfront, another $20 million in an equity investment, and up to $605 million in milestones linked to the progress of the asset. Transactions of this sort are the norm in the biotechnology industry—and usually pass without intervention. 

The FTC more typically acts to stop acquisitions of commercial scale companies, if it determines they will undermine competition. Sanofi’s decision to walk away from the transaction rather than do battle with the FTC can be interpreted as an admission that it didn’t have a strong case or that it doesn’t have the appetite to build one. It leaves Maze looking for another deal – and if it fails to find one, the FTC may itself have a moral case to answer. But it also leaves other small biotechnology firms scratching their heads—as yet another obstacle to deal-making emerges. 

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