AstraZeneca's MedImmune Acquisition Should Receive Regulatory Approval

The AstraZeneca (AZN) -MedImmune Inc. (MEDI) acquisition deal is the largest biotech deal to surface since the Immunex/Amgen (AMGN) transaction almost five years ago. There is one simple factor that applies to biotech deals with respect to competition-related reviews (particularly the DOJ/FTC): a specific niche overlap(s) must exist where one or both of the companies are dominant in that niche in order to draw any sort of antitrust interest. In other words, the nature of the industry (i.e. medical-oriented, rapidly changing) allows for far less scrutiny than many other complex industries. The IMNX-AMGN second request focused on a single arthritis product (Interleukin-1), while the ILEX/Genzyme second request focused entirely on Campath, an organ transplant antibody.

In this case, there does not appear to be a single niche overlap in this combination similar to those which have drawn FTC interest in the past. There is some overlap in MEDI's secondary "Ethyol" product, which addresses cancer therapy side effects, and several of MEDI's pipeline vaccine products which will also treat various cancer indications (if approved by the FDA). It is this niche which makes the combination most appealing to AstraZenaca.

MEDI states the following regarding competition in the oncology segment:

To our knowledge, companies maintaining a significant active oncology marketing and sales presence include Amgen, Inc., AstraZeneca Pharmaceuticals, LP, Bristol-Myers Squibb Company, Eli Lilly and Company, Genentech, Inc., GSK, Hoffmann-La Roche, Inc., Johnson & Johnson, Novartis AG, Pfizer, Inc., and Schering. These companies have greater financial, technical, manufacturing, marketing and other resources than us and may be better equipped than us to develop, market and manufacture oncology therapies.

The oncology market, for both conventional pharmaceuticals and biotech, is probably the most competitive of all treatment segments, for obvious reasons. To our knowledge there has never been a merger involving the combination of cancer-treatment companies that has been viewed as anything but positive by regulatory in the U.S. or internationally. Again, the reasons for this are obvious.

Although research will continue to determine if there are any niche overlaps other than oncology or market shares in any segment which might be concerning, the impression at this point is that this deal will have no problem receiving quick regulatory approvals, even in a cash tender offer time frame. The Astra [A]/Zeneca [ZEN] merger in 1999 had absolutely no trouble clearing both the FTC and EU reviews, and the company should have no difficulty obtaining the same results in this case, despite its relatively large size.

The current projection is a successful tender offer completion is less than 60 days.

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