Needling Big Pharma

Plus: With loopholes so big you can drive a T-14 tank through them, Russian oil exports surge. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

May 17, 2023

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TOGETHER WITH

Good morning.

A recent anti-obesity law in the UK bars large stores and supermarkets from showcasing sugary and fatty treats in prominent locations near checkouts and entrances. But that isn’t causing Krispy Kreme CEO Mike Tattersfield to stress-eat his company’s patented glazed donuts. Tattersfield told the Financial Times on Tuesday that Krispy Kreme fans can simply be “trained” to find their favorite sweet treats in any grocery aisle or anywhere else you hide them.

No one knows better than he that the only way to keep donuts out of the hands of consumers is to pry them from their sticky, sugar-coated fingers.

Morning Brief

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Lina Khan strikes again.

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Twitter snaps up a new HR department.

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Russian oil gets fatter and slipperier.

Biotech

The FTC Wants to Block the $28 Billion Amgen-Horizon Therapeutics Deal

Big Pharma needs an antitrust antidote.

The Federal Trade Commission and its hard-nosed chair Lina Khan have struck again, this time filing a lawsuit in federal court on Tuesday to halt biotech giant Amgen’s $28 billion blockbuster acquisition of Horizon Therapeutics. Consider it a black box warning for the industry’s M&A-dependent business model in a newer, tougher antitrust world.

Doctor Khan’s New Orders

It’s been over a decade since the FTC moved to block a pharma deal of this scale. The previous status quo of lax regulatory oversight saw both pharma giants and biotech startups grow well-versed in (if not entirely reliant on) an M&A environment that bolstered legacy pipelines and offered frothy liquidity events for PhD-packing founders. And while the agency’s lawsuit targets Amgen and Horizon specifically, claiming the deal could allow Amgen to “entrench monopoly positions,” it doubled as a loud and clear message to the rest of the industry: That old status quo? We’re about to smash it into bits.

“Rampant consolidation in the pharmaceutical industry has given powerful companies a pass to exorbitantly hike prescription drug prices, deny patients access to more affordable generics, and hamstring innovation in life-saving markets,” FTC Bureau of Competition director Holly Vedova said in a statement.

The sector is now picking up plenty of clues as to which types of deals could face similar oversight moving forward:

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The bigger the deal, the higher the risk of FTC scrutiny. Deals between $20 billion and $50 billion are now most likely to attract the FTC’s attention, according to a Wells Fargo analyst note seen by Bloomberg.

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That would place Pfizer’s $43 billion deal to acquire cancer drugmaker Seagen, struck just in March, in the danger zone. On the other hand, Merck’s nearly $11 billion deal for Prometheus, agreed to about a month ago, is a relatively safe bet to avoid government interference.

Though Amgen’s current portfolio and Horizon’s suite of drugs lack the traditional regulatory red flag of significant overlap, the agency says it is concerned that the new-look Amgen could force drug buyers to pay outsized prices for Horizon’s products. Highlighted in particular are gout-treatment Krystexxa and thyroid disease-treatment Tepezza, both of which have little market competition and cost hundreds of thousands of dollars yearly.

Buy the Dip? Unsurprisingly, the lawsuit sent chills across the entire industry; the SPDR S&P Biotech ETF, for example, dropped 3.4% Tuesday morning. But Khan and Co.’s antitrust eyes have proven more than once to be bigger than their stomachs — look no further than the FTC’s recent retreat from its lawsuit attempting to block Meta from acquiring VR game studio Within Unlimited. Jefferies analyst Akash Tewari sees the lack of commercial overlap between Amgen and Horizon drugs as evidence that the FTC may be overstepping. “[Khan’s] not shy about bringing forth cases,” he wrote. “But winning them is another matter.”

– Brian Boyle

Tech

Twitter Makes Its First Musk-Era Acquisition

(Photo Credit: Souvik Banerjee/Unsplash)

Go on Twitter, you’ve had a rough few months. Treat yourself.

Twitter has agreed to buy a tech recruitment startup called Laskie, Axios was first to report. This marks a break in Twitter’s usual programming under Elon Musk’s leadership, which has mostly involved taking a Samurai katana to costs and upsetting various vendors who claim the company is not paying its bills.

Buyer’s Regret(s)

As of February, Twitter had around 2,000 staff remaining out of the 7,500 that worked there before Musk took over. It’s not possible to tell which departments suffered the deepest wounds, but in March a worker who was laid off (and later re-hired following a public exchange of tweets with Musk himself) said he couldn’t get an answer from the company’s HR department as to whether he was still employed after he lost access to his work accounts. That incident suggested Twitter’s HR might be just the teensiest bit underpowered (though less so than its public relations department, which has been reduced to sending automated poop emojis to inquiring journalists).

As such, Laskie might represent something of an acqui-hire. In a CNBC interview on Tuesday Musk said Twitter needs to refill some of the roles it axed in its desperation to cut costs, admitting the company adopted something of a spray-and-pray methodology. “We absolutely need to hire people. And if they’re not too mad at us, probably rehire some of the people that we let go,” Musk said. It also looks as though he’s eager to turn his attentions and granular management style back to Tesla:

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Musk told Tesla staff in an email on Monday that he wants hiring lists sent to him weekly for approval. “No one can join Tesla, even as a contractor, until you receive my email approval,” Musk said in the email which was obtained by Insider.

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Twitter’s new CEO Linda Yaccarino, a presumably hardcore former advertising exec at NBCUniversal, is due to start work in six weeks. It is as yet unconfirmed whether she will inherit Musk’s title of “Chief Twit”.

Tesla in India: Bloomberg reported on Tuesday Tesla is sending a team of execs to India this week to smooth-talk officials from Narendra Modi’s government, which has previously objected to Tesla selling its made-in-China cars on the sub-continent. Tesla would like to move at least some of its supply chain to India as a way of lessening its dependence on China, according to Bloomberg, but keeping both India and China happy will be tricky; the two countries are engaged in a border dispute, Tesla is building a new battery plant in Shanghai, and Tesla is facing white-hot domestic competition in China where the CCP occasionally accuses the company of spying. It’s a geopolitical dance more complex than even the most high-budget Bollywood set piece.

– Isobel Asher Hamilton

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Trade

Russian Oil Exports Climb Ever-Higher

Russia may be falling short on the battlefield in Ukraine, but it’s running circles around Western regulators.

In April, Russia’s crude oil exports hit their highest volume since its invasion of Ukraine, according to the International Energy Agency. Around 80% of those exports went to China and India, and as Western nations consider another round of sanctions one EU official told the Financial Times that Russian oil being refined and resold by India could be next on the regulatory hit list.

Mixing It Up

Russia’s exports rebounded to pre-invasion levels in March, and April marked a new high on top of that recovery. Revenues remain hobbled by the G7 $60 price cap on barrels and overall drops in oil prices. Compared to a year ago, Russia’s oil export revenues in April were down 27%, according to the IEA.

Still, Western officials see the increased flow to India in particular as a loophole-shaped problem:

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The EU’s High Representative of the Union for Foreign Affairs Josep Borrell told the FT that Indian refineries are buying up cheap Russian crude oil, which is then synthesized into diesel or gasoline and sold to Europe.

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“That India buys Russian oil, it’s normal. And if, thanks to our limitations on the price of oil, India can buy this oil much cheaper, well the less money Russia gets, the better,” Borrell said, but added: “if they use that in order to be a center where Russian oil is being refined and by-products are being sold to us […] we have to act.”

This closely mirrors concerns from G7 leaders over Russian diamonds, which are often polished in India, at which point their origins become impossible to ascertain.

International Airspace: It’s not just Russian exports that are slipping through sanction loopholes. The New York Times got hold of Russian customs data that showed $14.4 million in American-made plane parts found their way to sanctioned Russian airlines over eight months last year. Sanctions-evasion, it’s a two-way sky.

– Isobel Asher Hamilton

Extra Upside

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Trademark trial: Taco Bell wants to free the “Taco Tuesday” trademark from a Wyoming taco chain you’ve never heard of.

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Bitcoin, meet Brussels: EU passes world’s first comprehensive cryptocurrency regulations.

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