Evaluating Killer Acquisitions in Biotechnology Transactions

This paper seeks to quell the lack of clarity surrounding so-called “killer acquisitions” in transactions in which a large pharmaceutical company (with marketed and developmental drugs) acquires a nascent biotechnology firm primarily for the commercial potential of a therapeutic candidate. “Killer acquisitions,” as defined in a seminal 2020 paper by Cunningham, Ederer, and Ma, refer to deals in which the smaller firm is purchased with the specific aim of shuttering the nascent program due to competitive pressure on the acquirer’s existing product. Recent enforcement actions (Sanofi-Maze, Adobe-Figma, Questcor-Synacthen, CDK Global-Auto/Mate) reflect unclear standards and tests for what constitutes a killer acquisition and how to respond. After analyzing past actions and potential incentives on future biotechnology innovation, this paper determines that enforcement actions should more often occur in Phase 2/3 or later stages of trials, should more closely evaluate the target’s funding position, should offer completely incontrovertible evidence of intent to “kill” target’s product, use broader market definitions, and overall be more predictable so that future investors can fund new drug development with confidence.