Is Allergan unloading 2 drugs enough to sell FTC on AbbVie buy? Analysts aren't so sure

Allergan headquarters
Allergan has decided to sell brazikumab and Zenpep in anticipation of possible FTC scrutiny over its AbbVie merger. (Allergan)

Allergan has confirmed it will hive off two drugs so that AbbVie’s $63 billion takeover offer could pass U.S. antitrust scrutiny. But recent regulatory decision—and indecision—on pharma deals has analysts worried whether that would be enough.

In an investor Q&A published Tuesday, Allergan said it will sell brazikumab and Zenpep as part of the merger process, “irrespective of whether such divestitures are required by the regulators.”

Those two have been suspected for-sale targets since the deal was announced, given their overlap with existing AbbVie drugs in their respective fields.

Brazikumab and AbbVie’s recently approved psoriasis therapy Skyrizi are both IL-23 inhibitors. Allergan is testing brazikumab in phase 2/3 for ulcerative colitis and Crohn’s disease, just as AbbVie aims for the exact same indication as a label add-on for Skyrizi. Besides, AbbVie’s Humira already has a tight grip on the inflammatory bowel disease market.

Meanwhile, Zenpep competes directly against AbbVie’s Creon as pancreatic replacement enzymes. Because Creon is making more money than Zenpep—with 2019 first-half sales of $484 million versus $133 million—the Allergan drug ended up on the chopping board.

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It’s worth noting that Allergan said it decided to sell voluntarily, without a request from the U.S. Federal Trade Commission. It's a precautionary move as unexpected developments in two other biopharma deals suggest a possible scale-up for U.S. antitrust scrutiny.

Celgene was ordered to divest its PDE4 psoriasis drug Otezla to seal Bristol-Myers Squibb's $74 billion buyout, though industry watchers don’t think it and Bristol's experimental TYK2 inhibitor BMS-986165 could stymie competition. And Roche’s $4.3 billion acquisition of Spark Therapeutics has been pushed back five times without a clear indication of why the FTC needs so much extra time to review it.

Allergan and AbbVie could face their own demands from the FTC even with those two sales. “While we do not anticipate any meaningful FTC hurdles and continue to expect the deal to close by early 2020, focus will (and should) remain on whether further divestitures will be required to secure approval,” RBC Capital analyst Randall Stanicky said of the AbbVie-Allergan deal in a Tuesday note to clients.

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Because where the FTC's new bar lies remains a mystery, industry watchers are concerned the troubling signs could end up scuttling future deals.

In a survey of nine M&A-specialized firms, six said they’re concerned that the apparent change of course at the FTC could dampen enthusiasm for future biopharma dealmaking, Bloomberg recently reported.