This post is part of a Hub and Spoke series on Health Care. You can find previous installments here, here, here, and here.
After a costly bidding war with Novo Nordisk, Pfizer emerged victorious to acquire Metsera, a promising GLP-1 drug developer. But the real story is how it leveraged antitrust law to clinch the deal.
GLP-1s, a class of drugs used not only to combat diabetes but also to treat obesity and other metabolic conditions, are all the rage in the United States. Enter Metsera, a pharmaceutical manufacturer with a “broad pipeline” of eight GLP-1 drugs that are nearly ready for consumers. Seeing the opportunity, both Pfizer (developing various GLP-1s) and Novo Nordisk (maker of the highly successful GLP-1, Wegovy) were interested in acquiring Metsera. In late September, Pfizer entered into a proposed acquisition of Metsera, only then to be undercut by Novo, who made an “unsolicited proposal” for significantly more money.
In response to Novo’s unsolicited proposal, Pfizer filed its first lawsuit in the Delaware Court of the Chancery against Metsera, its board, and Novo claiming breach of contract, breach of fiduciary duty, and tortious interference and seeking a preliminary injunction. The court ultimately denied Pfizer’s motion for a preliminary injunction.
But Pfizer had other cards to play. In conjunction with its contractual claims, Pfizer began an antitrust campaign to halt Novo’s acquisition of Metsera, filing a second lawsuit against Metsera, its board, and Novo in the District of Delaware. In its complaint, Pfizer alleged that Novo, who has a 50% market share of GLP-1s, offered a $6.5 billion payment to Metsera, to protect its dominant position. The structure of the payment was purportedly designed to avoid initial antitrust regulatory review, as it would allow Metsera to “immediately and permanently dividend that cash to its shareholders” before reporting the transaction. The complaint goes on to allege that the defendants knew that Novo’s “dominant market position” in GLP-1s likely meant the merger would be blocked, but they did not “care.” That fact is bolstered by a merger closing date of nearly two and half years from the consummated agreement, meaning Novo and Metsera did not view this transaction as critical or timely, but instead wanted to ensure the Metsera stockholders got their money up front. Pfizer ultimately alleged that this payout agreement between defendants violates Sections 1 and 2 of the Sherman Act, and Section 7 of the Clayton Act.
Simultaneous to the filing of the antitrust complaint, the Federal Trade Commission sent letters to Novo and Metsera asserting that the agreement may violate federal requirements for a premerger filing under the Hart-Scott-Rodino Act. Mere days thereafter, Pfizer again re-upped its offer and Metsera relented—agreeing to a revised transaction value with Pfizer that greatly increased the purchasing price of the company. In its press statement, Metsera’s board underscored that antitrust risks, including “a call” from the FTC, presented “unacceptably high legal and regulatory risks” for the company to move forward on the Novo proposal.
The winding road leading to Pfizer’s acquisition of Metsera underscores that for large companies, the antitrust laws are not only a shield but can also act as a sword. Publicly traded companies, like Pfizer, are often faced with potentially anticompetitive conduct by their rivals, including acquisitions designed to cement a competitor’s market power. Companies should always consult antitrust counsel on the viability of potential claims to determine whether the antitrust laws can be used not only for their own benefit, but also to benefit the public writ large.
