On January 31, 2014, the Federal Trade Commission announced that Thermo Fisher Scientific Inc., a global manufacturer and distributor of scientific products, laboratory equipment and consumables headquartered in Waltham, Massachusetts, agreed to sell assets to GE Healthcare. This asset sale settles FTC charges that Thermos’ proposed $13.6 billion acquisition of Life Technologies Corporation (Life), headquartered in Carlsbad, California, would likely substantially lessen competition.

The FTC complaint challenging the transaction alleges that the deal as originally proposed would have eliminated competition between Life and Thermo Fisher, which supplies siRNA reagents under its Dharmacon brand, and cell culture media and sera under its HyClone brand. The FTC specifically charged the acquisition would substantially increase concentration in the markets for short/small interfering ribonucleic acid (siRNA) reagents, cell culture media, and cell culture sera, enabling the combined firm to raise prices and reduce quality for consumers.

The proposed order settling the FTC’s charges requires Thermo Fisher to divest its gene modulation business, Dharmacon, which contains the siRNA reagents business, as well as its cell culture media and sera business including the HyClone brand to GE Healthcare, along with all intellectual property and know-how necessary to operate each of the divested businesses.

Regardless of the motivation behind the FTC decision to force Thermo Fisher to transfer assets to GE Healthcare, the premise behind the action relates to three product markets in which the Life acquisition was believed to likely harm competition:

• siRNA reagents. siRNA reagents are used to study gene function by selectively turning off, or “silencing,” gene expression and inhibiting protein synthesis. Scientists use  siRNA reagents for studying the cause of disease, conducting genetic research, and in connection with agricultural research and crop production. Customers can buy siRNA reagents either individually or in “libraries,” which are curated collections of reagents used to study gene silencing and its effect on groups of interrelated genes.

• Cell culture media. Cell culture media are mixtures of ingredients, including salts, sugars, amino acids, and vitamins, which create an environment conducive to growing cells outside the body.

• Cell culture sera. Cell culture sera are liquids derived from animal blood that are rich in nutrients and growth factors. Scientists use serum as a supplement to cell culture media to propagate the growth of mammalian cells. Serum is most commonly a byproduct of the cattle industry. The most common variety of cell culture serum is fetal bovine serum, which is preferred by scientists and researchers due to its high quality and low contamination risk.

According to the FTC’s complaint, aside from Thermo Fisher and Life, there are few meaningful competitors in these relevant markets. The FTC alleged that the combined company would have a share of more than 50 percent of the worldwide market for individual siRNA reagents, and greater than 90 percent of the market for siRNA reagent libraries. Post-acquisition, the FTC estimates that Thermo Fisher will still have at least a 50 percent share of the worldwide market for cell culture media, and 60 percent of the market for cell culture sera.

Still, did the FTC really need to force the sale of assets to a company headquartered outside the United States? The FTC explained that it was requiring the sale of assets to GE Healthcare because the company has the experience, reputation, and resources to maintain the benefits of competition that otherwise would have been lost as a result of the acquisition. Notwithstanding, this FTC-mandated sale of assets to GE Healthcare, which is headquartered in the United Kingdom and a division of General Electric, has to raise some eyebrows. Some may question the appropriateness of the United States Federal Trade Commission requiring assets of two U.S. companies to be sold to a foreign corporation.

Tags: biotech, Biotechnology, Federal Trade Commission, FTC, GE Healthcare

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