Novartis, Aurobindo admit defeat by FTC in aborting their $1B generics deal

Novartis headquarters
Novartis and Aurobindo Pharma terminated their $1 billion transaction involving U.S. generics and dermatology drugs after a protracted Federal Trade Commission delay. (Novartis)

Antitrust review has nixed a $1 billion transaction that would have created the second-largest U.S. generics player.

More than a year and a half after announcing that Sandoz's stateside generics portfolio and dermatology business would change hands, Novartis and Aurobindo Pharma have finally called it quits.

“This decision was taken as approval from the U.S. Federal Trade Commission (FTC) for the transaction was not obtained within anticipated timelines,” Novartis said in a statement Thursday.

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The deal was signed in September 2018 as part of Novartis CEO Vas Narasimhan’s plan to focus the Swiss pharma more on innovative medicines. Shedding U.S. oral generics looked like a wise step as pricing pressure mounted across the U.S. sector and dragged down Sandoz's overall performance.

For Aurobindo, buying about 300 products would have made it the second-largest generics company in the U.S. by prescriptions and helped the Indian pharma expand its global business further.

Originally, Novartis was expecting to close the deal in 2019, but U.S. antitrust review caused significant delays. The Economic Times previously reported that regulators had requested more information on a lawsuit against Aurobindo, a development that pushed the planned closure into 2020.

RELATED: The top 10 largest biopharma M&A deals in 2019

Along the way, Aurobindo provided several versions of an expected timeline. During a conference call in early February, U.S. Chief Financial Officer Swami Iyer told investors the company believed it had provided all the documents FTC wanted and that it was looking to wrap everything up in the first quarter. That target once again fell through.

A Novartis spokesperson told FiercePharma there’s no breakup fee associated with the termination, and the company will provide an update on the Sandoz business together with its first-quarter announcement April 28.

Earlier this year, Novartis expected group sales to grow in the mid- to high-single digit range without the portfolio earmarked for Aurobindo

In 2019, the U.S. business again hurt Sandoz’s performance, which increased 2% at unchanged foreign exchange rates to $9.7 billion. Of that, price erosion in the U.S. dealt a six-percentage-point hit. Excluding the U.S., Sandoz net sales grew 7% at constant currencies.

RELATED: AbbVie, Allergan merger may face regulatory delay due to COVID-19 despite drug sell-off: report

Increased antitrust scrutiny on biopharma deals became a common theme in 2019. It triggered multiple delays to Roche’s $5.1 billion acquisition of Spark Therapeutics and forced Celgene to sell blockbuster psoriasis med Otezla to win clearance for its $74 billion merger with Bristol Myers Squibb. It also derailed Illumina’s proposed $1.2 billion offer for smaller DNA sequencer player Pacific Biosciences.

AbbVie and Allergan have signed an agreement with the FTC to offload experimental inflammatory bowel disease med brazikumab and two pancreatic replacement enzymes to clear antitrust hurdles to their own megamerger. But review of that $63 billion tie-up might still be extended because of the COVID-19 pandemic.

Hydroxychloroquine, an old anti-malaria drug, has emerged as a promising treatment against the novel coronavirus. Sandoz is among several companies making the drug, and it’s promised to donate up to 130 million doses to support the global response.

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