Fresenius' $4.3B buyout of Akorn threatened by data integrity probe

Akorn
Akorn, which has a buyout offer from German drugmaker and dialysis specialist Fresenius, says it is investigating allegations that FDA data standards were violated in its drug development operation. (Image: Akorn)

Fresenius and Akorn say they are investigating whether Akorn violated FDA drug development standards, and that the results of the probe could scuttle the German's drugmaker's $4.3 billion deal to buy the U.S. generics maker. 

In a statement late Monday, Akorn said the two companies, with the help of of outside consultants, are investigating “alleged breaches of FDA data integrity requirements relating to product development.” It said so far the investigation hasn’t found anything that would affect Akorn finances materially and that it “does not believe this investigation should affect the closing of the transaction with Fresenius.”

But in its own statement Frensenius said that its board would evaluate the results of the probe and “the transaction may be affected if the closing conditions under the merger agreement are not met.”

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Both companies said there would be no further updates about the matter, but then, Reuters reported, CEO Stephan Sturm was more pointed in a press conference today saying, “If the allegations prove to be conclusive and are so material that they would impact our targets, then we will withdraw from the contract.”

RELATED: Fresenius pulls off sterile injectables double whammy, snags Akorn as well as Merck KGaA's biosimilars business

The disclosures came as Fresenius today reported Q4 sales that were up 8% in constant currencies to €4.4 billion ($5.4 billion). It reported that sales in North America, where it faces “headwinds,” were up 8% to €3.1 billion in Q4. Fresenius said it expects adjusted group sales to grow between 5% and 8% in 2018.  

The German drugmaker last year agreed to buy Akorn to expand its Fresenius Kabi sterile manufacturing capacity. It would get three U.S. plants and one in India in the Akorn deal, which was slated to close in early 2018.

Sterile injectables, which is Fresenius’ emphasis, accounted for about 35% of Akorn's $1.1 billion in sales last year, but analysts also liked that Fresenius was additionally acquiring some new segments like ophthalmics and topical solutions, which might be less vulnerable to the generics pricing pressure that has made life difficult for generics producers in the last few years.

RELATED: Akorn sterile plant in Illinois smacked again by the FDA

However, FDA concerns about Akorn’s manufacturing capabilities surfaced even before the companies announced the potential for drug development violations. The FDA last spring issued a Form 483 to Akorn’s sterile manufacturing plant in Decatur, Illinois. While it contained only three observations, the issues followed an inspection the year before when nearly a dozen problems were noted.

In one observation, an inspector reported that the company released products even after it was pointed out to Akorn’s VP of domestic sterile products quality assurance that particles that might contaminate injectables appeared to be shedding from a conveyor belt. The inspector noted that the plant had produced 88 lots on that line since it was was set up in that configuration.

Akorn's India plant has also been on am import alert, banning its products from the U.S., since 2015.