Dive Insight:

Mergers and acquisitions have proven essential to the success of many drug companies. Indeed, some of the most profitable medicines in history, including Humira, Keytruda and Sovaldi, were part of multibillion-dollar buyouts.

Biopharma dealmakers have therefore kept a watchful, if not wary, eye on the FTC, as the agency has final say on whether acquisitions in the U.S. are allowed to proceed.

That focus has only intensified since last March, when the FTC and its counterparts in Canada, Britain and the European Union said they would be updating their processes for evaluating pharmaceutical acquisitions. While not fully clear what these updates will look like, FTC Commissioner Rebecca Kelly Slaughter noted at the time how some recent deals, including the $74 billion takeout of Celgene and the $63 billion purchase of Allergan, didn’t seem to get comprehensive enough reviews.

“The impact of pharmaceutical mergers isn’t just about the respective size of the two companies, because pharma is an area that depends so heavily on innovation and entry of new products often developed by small competitors,” Slaughter said last year.

“We’re really looking at these questions about innovation and what’s going to get new treatments and new drugs to the market,” she added, “so that consumers have access to them and, importantly, have access to them at prices that they can afford.”

This apparent step-up in regulatory scrutiny raised questions about whether smaller biotech acquisitions, like Pfizer’s buyout of Arena, would also be affected. For example, analysts had noted that regulators could probe overlaps between the two companies’ research.

Among Arena’s drug programs, the most advanced is in clinical testing for ulcerative colitis, Crohn’s disease and eczema — conditions that Pfizer is already targeting with one of its own experimental medicines, called ritlecitinib, and a newly approved product named Cibinqo. Pfizer’s blockbuster anti-inflammatory treatment Xeljanz is also approved to treat ulcerative colitis.

Additionally, even after Pfizer disclosed that it would pay $100 per Arena share, the smaller company’s stock price continued to hover at around $90, reflecting how investors had concerns as well.

Wall Street “is acutely aware of the potential for this deal to run into a speed bump,” wrote Joseph Schwartz, an analyst at SVB Leerink, in a Dec. 14 note to clients on the deal’s announcement.

Yet, three months later, Arena and Pfizer closed their deal as planned without any divestitures or asset sales required of Pfizer by the FTC.