US concerns on key drugs wreck Aurobindo’s plan to buy Sandoz biz

Hyderabad: Concerns from the US antitrust watchdog Federal Trade Commission (FTC) over likely monopoly and disruption of continued production of 10 critical common drugs have forced Indian drug maker Aurobindo Pharma to terminate its $1-billion acquisition of the US dermatology business and manufacturing facilities of Sandoz, which is a part of the Swiss giant Novartis.

The bouyout, which was the largest outbound pharma deal by an Indian company at the time of its announcement in September 2018, would have enabled Aurobindo to emerge as the second-largest generics player by prescription numbers in the US. The Hyderabad-based firm was to pay $900 million upfront and $100 million in performance-based payouts .

The over 1.5-year delay in regulatory approvals made the two firms mutually terminate the agreement on Thursday. Aurobindo’s shares fell 5 per cent to close at ₹392.35 apiece.

The FTC was not convinced on several issues pertaining to continued availability of these critical drugs and didn’t accept the alternatives suggested by the two companies to allay the concerns of the regulator, said people in the know.

The FTC had identified some 10 common products, mostly pencillins and cephalosporins, between Aurobindo and Sandoz, where acquisition would lead to dominant cornering of market share. “The watchdog insisted on ensuring continued production and availability of these 10 products with no increase in prices for at least seven years,” said an official on condition of anonymity.

Both the companies were conscious that if together the market share of some products was very significant, they had to exit from the set of products to ensure that those products are competitively priced in the market, said one of the persons in the know, adding, “Though data on product mix and market share of the companies was in the public domain, the companies were not sure what percentage of market share of which particular products would be a matter of concern for the FTC”.

Another person in the know of the developments said, “Sandoz was not ready to continue production of these drugs for not more than three years, while Aurobindo was not allowed to produce them under the antitrust norms.”

A top Aurobindo executive said, “Though the deal was a preferred one, it was not a showstopper for us. Even without the acquisition deals, Aurobindo was growing significantly over the last several quarters. Even without this deal, Aurobindo will continue to grow.”