The "merger wave" in the pharmaceutical industry is underscoring the need to be able to interact with the antitrust regulators at the Federal Trade Commission (FTC) effectively and efficiently in order to maximize the chances of obtaining Hart–Scott–Rodino (HSR) clearance quickly. Wave or no wave, merging parties typically wish to secure antitrust clearance as soon as possible to realize the associated synergies and commercial momentum, or to increase the certainty associated with a potential transaction if the target is "in-play." But the large number of transactions in the industry today underscores the need for speedy clearance so that companies can stay ahead or keep apace of their peers and maximize shareholder benefits. FTC regulators specializing in the pharmaceutical industry have become, and likely will continue to be for the foreseeable future, extremely busy. As a result, developing an efficient strategy to deal with the FTC and other antitrust agencies reviewing pharmaceutical transactions has never been more important for companies.

The guidelines below focus on the common scenario in which the goal is to maximize the chances of obtaining FTC clearance or reducing the scope of a so-called "Second Request" of a pharmaceutical transaction during the initial HSR waiting period.

Of course, we recognize that not all pharmaceutical transactions are alike and differences can impact—sometimes significantly—the parties' FTC strategy and timing. For example, some transactions require clearances from many jurisdictions around the globe, exposing the parties to different regulatory/timing procedures, remedial policies and, potentially, risk profiles. Moreover, some transactions are good candidates for clearance without any remedies, while others have more remedial risk. These and other factors should be analyzed on a case-by-case basis to determine whether the strategy outlined below makes sense for a particular transaction.

That said, here are six things to do to maximize your chances of securing FTC antitrust clearance quickly:

  1. Place a courtesy call: In general, if the transaction is high-profile, involves a shorter 15-day waiting period or likely will require some interaction with the regulators before clearance, it is advisable to call the Mergers I division at the FTC soon after announcement. This notice will allow the FTC to staff the matter promptly and get the investigation up and running quickly. The call also lets you inform the agency of the transaction's pro-competitive rationale, expected timing and objectives during the initial waiting period.
  2. Have a well-considered HSR filing strategy: It is important to keep in mind the overall deal timing in determining when to file HSR and trigger the initial waiting period. Balancing the tradeoffs of starting the clock against giving the agency more time to get up to speed pre-filing often is an important question to consider. This is especially the case for cash tender offers, which trigger a shorter, 15-day initial waiting period. When the HSR filing is made, it is customary to send a courtesy copy directly to the investigating staff (in addition to the formal copies sent as a part of the actual HSR filing package).
  3. Prepare the FTC's product chart in advance: The FTC Mergers I staff uses a standard pharmaceutical product and pipeline chart as an initial tool to identify potential overlaps. If possible, companies should prepare the required product and pipeline chart before the transaction's announcement. This chart details the composition and uses of the drugs the pharmaceutical companies are marketing, developing or otherwise have some interest in. Because the chart often is used as a first tool by the investigating FTC staff, it can help get the review underway efficiently. Companies should be prepared to submit it as soon as possible after the announcement.
  4. Offer to meet: In general, it is a good idea to offer to meet with the FTC staff at its earliest convenience in order to explain the rationale for the transaction, identify any potential areas of overlap and explain why those areas should not present concerns. For this meeting, you should be prepared to go into some detail on the potential overlaps. The FTC staff investigating pharmaceutical mergers tends to be very knowledgeable about the industry, given its longstanding experience in the area, and there is a long track record of how the FTC tends to analyze potential overlaps in the branded and generic pharmaceutical spaces. An informed, comprehensive initial meeting can go a long way in convincing regulators there likely is no competitive issue, or at least focusing—and narrowing—the investigation going forward.
  5. Anticipate questions: Be prepared to quickly respond to follow-up questions from the regulators. Respond to their requests as soon as possible, ideally within a day or two. Typical initial questions include requests for sales and prescribing data, brand plans, key opinion leader contract information and industry reports.
  6. Follow up with the staff: Cultivating a positive working relationship with the investigating staff is important, and you should follow up as often as is appropriate. In addition to staying abreast of the progress of the review, this ensures that you have the most time possible to address any questions that arise.

The back and forth with regulators during the initial HSR waiting period can move very quickly. Preparation, organization and tactful persistence can make the process smoother for all involved, and can enhance your chances of prompt clearance.

Even though the FTC is extremely busy, it is able and willing to make decisions quickly if the facts warrant and if it obtains information and engagement from companies in a timely manner. We and our co-counsel recently were able to obtain early termination during a 15¬ day cash tender offer initial waiting period for a multibillion-dollar pharmaceutical transaction by following these and other practices in our engagement with the FTC.

In another large pharmaceutical transaction recently before the FTC, these practices, including meeting with regulators even before submitting the HSR filing, allowed us and our co-counsel to reduce the number of potential overlaps under review from roughly 20 to a few in a matter of a couple of weeks. The early engagement saved time and money for all involved.

Originally published by CorporateCounsel.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.