Novartis' Sandoz appears on the mend. But where is that Aurobindo U.S. generics deal?

If you think Roche’s $4.3 billion offer to buy out Spark Therapeutics is the only biopharma deal being significantly delayed by antitrust reviews, think again.

Over a year has passed since the $1 billion acquisition of Novartis’ Sandoz U.S. oral solids and dermatology business, by India’s Aurobindo Pharma, was made public. And still, the two parties are expecting it'll be months before they complete the transaction.

The reason? Some “elements” that the U.S. Federal Trade Commission (FTC) has requested, Novartis CEO Vas Narasimhan told reporters during a call Tuesday. He also confirmed that the recent recall of generic Zantac due to contamination from a suspected carcinogen has not affected the deal at all.

When the companies first announced the tie-up in September 2018, Novartis said it expected to close it in 2019; now, the company says it could be done “in the coming months, pending regulatory approval.” Both companies are working closely with the authorities, including the FTC, a Novartis spokesperson told FiercePharma, declining to offer more details on the FTC’s demands.

There’s clearly a delay in expected closure time. During a conference call in May, Aurobindo U.S. Chief Financial Officer Swami Iyer told investors the company was “in the last leg of the process of obtaining FTC approval” and that it was on track to submit the final letter with the proposed product divesture and buyers list to the U.S. agency. At that time, he said the process could take between eight to 12 weeks. That 12-week period has already elapsed as of September.

On Aurobindo’s quarterly earnings call in August, Iyer again said it was “making good progress” with the FTC. But this time, he said only that the company would get the deal closed “sometime soon or in the near future,” rather than offering up a more specific timeline.

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At this point, additional FTC scrutiny has become common for biopharma dealmakers. Industry watchers have been primed with continuous delays to Roche’s Spark takeover, the unexpected request for Celgene to sell Otezla in the $74 billion Bristol-Myers Squibb merger and the so-called “second request” for more information sent AbbVie and Allergan’s way even after Allergan volunteered to jettison two drugs.

For Sandoz-Aurobindo specifically, the addition of about 300 generic products to the Indian firm’s portfolio would create the second-largest generics player in the U.S. by number of prescriptions. Some selloffs may be natural to expect, but a 14-month gap since the deal announcement is not.

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Novartis is currently trying to turn Sandoz into an autonomous business within the group, shifting its focus to hard-to-make copies and biosimilars. In the third quarter, the generics unit turned out sales of $2.48 billion, up 3% year over year and nearly 4% above the Street’s expectations. As a result, Novartis raised Sandoz’s full-year guidance to low single-digit growth.

But the third-quarter expansion came largely from biologics—which increased 27% during the quarter—and from outside of the U.S., as continued price erosion in the U.S. posed a drag, Richard Saynor, Sandoz’s recently appointed CEO, told investors on a Tuesday call.

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It was basically the same tune Novartis has sung before. This time, the 4% global price erosion was slightly better than the 7% reported in the second quarter and the 9% in the first. However, Sandoz’s U.S. pricing pressure appears to be worse than the 2% SVB Leerink analyst Ami Fadia gleaned from the National Average Drug Acquisition Cost data.

That means if Aurobindo is indeed required by the FTC to shed some Sandoz products, it might be difficult to find an ideal buyer at a winning price. The Indian drugmaker has pegged $900 million pre-divestment for sales of the acquired portfolio in the first 12 months after deal closure.

“We have no reason to believe that there will be any deterioration in the expectations,” Iyer said in August. “We are fairly optimistic about what we expect to achieve.”