FTC throws up extra hurdle to AbbVie's Allergan buy as Roche, Spark dwell in limbo

AbbVie
The U.S. Federal Trade Commission has sent a "second request" to AbbVie and Allergan on their proposed $63 billion merger. (AbbVie)

First, the Federal Trade Commission dug in deep on Bristol-Myers Squibb's Celgene buy. Then it held up Roche’s Spark Therapeutics takeover—which is still sitting in idle. Now, the U.S. antitrust watchdog has put another big biopharma deal under the microscope.

The FTC has issued another demand for information from AbbVie and Allergan on their proposed $63 billion merger, the companies said Friday, adding that the deal is still expected to close in early 2020—or at least so they hope.

The so-called “second request” comes as a coalition of unions and consumer groups are petitioning the FTC to “carefully examine” the deal and block it outright if necessary. It also follows a similar request the FTC sent to Roche, delving into its $4.8 billion Spark buyout, triggering a series of delays and extended tender offer deadlines.

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Monday, Roche and Spark once again said the FTC and the U.K. Competition and Markets Authority need more time to complete their reviews. Now, as only 21.4% of Spark’s shares have been tendered as of Friday, the offer will instead expire on Oct. 30. That would be about eight months after the deal went public late February.

Just as is the case with Roche-Spark, the FTC has offered no detail about why it's worried about the AbbVie-Allergan combo. For Roche, analysts suggest the agency's concerned about combining Spark’s hemophilia gene therapy franchise with the Swiss drugmaker’s fast-growing hem A drug Hemlibra.

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

Aiming to sail through its antitrust evaluation, Allergan volunteered to sell two drugs, brazikumab and Zenpep. Brazikumab belongs to the same IL-23 inhibitor class as AbbVie’s Skyrizi, and both are eyeing the inflammatory bowel disease market. Zenpep and AbbVie’s Creon are both pancreatic replacement enzymes.

At the time, market watchers said they didn't expect meaningful FTC hurdles, but here we are, looking at a “second request”—which AbbVie labeled “as expected.” Perhaps, but not necessarily routine.

The advocacy groups, on the other hand, aren't worried so much about product overlap, but what they consider anti-competitive behavior across the board.

Both companies have a habit of using price hikes, rebate walls and controversial intellectual property tactics to stifle competition, the unions and public interest organizations said in a recent letter to FTC Chairman Joseph Simons. Should they be allowed to merge into one, it would create the world’s fourth-largest drugmaker with even greater negotiating power against payers, they argued.

RELATED: Hey, FTC, unions say: AbbVie-Allergan deal needs close look after 'anticompetitive' history

In a separate letter to Simons, a group of U.S. senators led by Sen. Amy Klobuchar, ranking member of the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, also voiced similar concerns.

Despite the FTC’s second request and the public pushback outside of specific drug markets, Wells Fargo analysts still “do not believe there is a significant risk of the deal not being finalized given the little overlap there is between the companies,” they said in an investor’s note Monday.

But to be fair, after Roche-Spark delays and Bristol-Myers Squibb and Celgene’s forced sale of Otezla, no one is sure what FTC might demand in exchange for a biopharma deal approval.

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