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UPDATED: Allergan, Valeant & Johnson & Johnson: Back Door Deals? Antitrust Laws?

UPDATED: Allergan, Valeant & Johnson & Johnson: Back Door Deals? Antitrust Laws?

June 23, 2014


Hey maybe someboday is paying attention!  Well at least seven U.S. senators are finally asking the right questions.  Keep Digging!

UPDATED: June 26, 2014 Bloomberg-Sonali Basak

Seven U.S. senators are asking federal regulators to review the potential impact of a hostile takeover by Valeant Pharmaceuticals International Inc. (VRX) of California-basedAllergan Inc. (AGN), the maker of Botox.

Allergan’s board has rejected a $54 billion tender offer from Valeant, which is based in Laval, Quebec. The Democratic senators wrote to the Federal Trade Commission and the Department of Justice on June 25, asking whether the deal might reduce both competition and research in certain markets. They also questioned the possible effect on drug prices. The signers included Dianne Feinstein of California, Christopher Coons of Delaware and Robert Menendez of New Jersey.

The letter cited “a growing trend in the pharmaceutical industry whereby companies make acquisitions, eliminate drug pipelines, slash R&D budgets, and arbitrage location headquarters in order to lower effective tax rates.”

Allergan Inc on Monday advised investors not to sell their shares to Valeant Pharmaceuticals International which launched a hostile takeover offer for the California-based Botox maker last week, saying it was “grossly inadequate.” Reuters

Johnson & Johnson’s  Mentor announced a collaberation agreement with Valeant on July 2, 2103

Per the terms of the agreement, Mentor and Medicis will form a joint physician loyalty program called the M2VP Program (Medicis-Mentor Valued Partner Program), which will include the MENTOR® line of breast implant products for the aesthetics (non-reimbursed) market and Medicis non-reimbursed facial aesthetics products, including neurotoxin, fillers and skin care. The agreement has a five-year term and is for the U.S., subject to any geographical expansion that may be agreed upon by the parties.

“We believe the creation of a combined loyalty program allows both organizations to deliver more value and choice to plastic surgeons operating in an increasingly competitive market,” said David J. Wilson, Worldwide President, Mentor Worldwide LLC. “By incorporating the best features of other programs, we’ve created a premier loyalty program that includes Mentor’s leading breast implant products – and provides product savings and benefits to our customers.”

As mentioned here Johnson & Johnson’s Mentor “decided” against their long awaited blockbuster Purtox just moments before Valeant made an aggressive play for Allergan in April of this year.  Could this all be designed to get around the government antitrust laws?

The main statutes are the Sherman Act 1890, the Clayton Act 1914 and the Federal Trade Commission Act 1914. These Acts, first, restrict the formation of cartels and prohibit other collusive practices regarded as being in restraint of trade. Second, they restrict the mergers and acquisitions of organizations which could substantially lessen competition. Third, they prohibit the creation of a monopoly and the abuse of monopoly power.  United States Antitrust Law

This story is far from over but I have a feeling it ends with Johnson & Johnson’s acquiring Allergan, one way or another.

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