Analyzing the Impact of Biotechnology Mergers

Undergraduate economics thesis studying the consumer impact from the merger of two biotech giants.

The Merger Of Thermo Fisher Scientific Inc. & Life Technologies™ And Its Effect On Consumer Surplus: A Cournot Model Approach

In 2013, Thermo Fisher Scientific Inc. proposed to acquire Life Technologies™. The merger of these two giants in the biotechnology industry drew concern from US, European and Chinese regulators who saw it as an opportunity for Thermo Fisher to attain monopoly control of the market – allowing them to raise price and reduce quality for consumers. Thermo Fisher was subsequently sued for anti-trust purposes, but settled the case after divesting their cell culture media/cell culture sera, gene modulation and magnetic beads product brands to GE Healthcare.

This research sets out to investigate the impact the merger had on the market for biotechnology products and services. Using the Cournot theory of economic competition, I develop a model to calculate approximate market share, quantity output and cost of production for Thermo Fisher, Life Technologies and their competitors. From the model, I can draw conclusions on how consumer surplus is affected by the merger, the efficacy of the settlement in preventing monopolization and what cost synergies the merged firm needs to produce at in order to leave consumers no worse off. This research finds that the merger certainly reduces consumer surplus and the settlement did little to prevent Thermo Fisher from acquiring a majority share in the markets for cell culture media/sera, siRNA reagents or polymer-based magnetic beads.

Thesis Advisor: Dr. Jonathan Williams