Aurobindo’s Sandoz deal may face further delays2 min read . Updated: 30 Jul 2019, 11:56 PM IST
- US Federal Trade Commission is yet to clear the deal announced last year
- In 2018, Aurobindo announced it will buy Sandoz’s commercial operations for $900 million
NEW DELHI : Aurobindo Pharma Ltd’s plans to acquire Sandoz Inc.’s dermatology business, besides three manufacturing units in the US, is likely to be delayed further, pending approval from the Federal Trade Commission (FTC), the US’s anti-trust regulator.
In September, Hyderabad-based Aurobindo announced that it would acquire the commercial operations of Swiss drug maker Novartis AGs’ generics unit in the US for $900 million. However, the proposed deal, which could emerge as the largest outbound deal by an Indian company, is yet to see the light of day considering that the FTC is yet to respond.
“The deal is taking much more time than anticipated, and questions are being raised about its uncertainty," said two people in the know, requesting anonymity.
An email query to Aurobindo Pharma on Monday did not elicit any response till press time. A Sandoz spokesperson said finalization of the deal “is proceeding according to plan" and “there was no delay". “We continue to target completion in H2, 2019," the spokesperson said in an emailed reply.
This apart, both firms are facing several issues at their respective units.
In June, Aurobindo received a warning letter from the US Food and Drug Administration (FDA) for one of its units in Srikakulam district in Andhra Pradesh, which was inspected earlier in the year. “The findings of the US FDA come as the drug maker eyes to increase its footprint in the US generics market," said the first person.
The same month also saw Aceto Corp., a US generic drugs distributor, accusing Aurobindo Pharma of sabotaging and systemically destroying the company’s business, when it filed for bankruptcy in a New Jersey district court. Aceto also sought damages from Aurobindo on charges of fraud, negligent misrepresentation and breach of contract, besides claiming compensation in punitive damages. The case pertains to a drug purchase agreement between Aceto and Aurobindo on 31 May.
Sandoz, on the other hand, has witnessed shrinking US sales over the past two years. The company spokesperson conceded that the business will continue to see significant price declines.
“Sandoz US sales declined by 7% in Q2, driven by continued industry-wide pricing pressure. We don’t break out sales for the to-be-divested segments, but continue to see significant price declines and expect that trend to continue. This is as forecast, and is one of the main reasons why we agreed to divest these businesses," the spokesperson added.
To add to its woes, in the past six months, Sandoz was led by three chief executive officers —Richard Francis, Francesco Balestrieri and Richard Saynor.
Francis stepped down as Sandoz CEO in March and was replaced by Balestriteri in April, before former GlaxoSmithKline executive Saynor was appointed as the CEO in July.
Saynor is also a member of Novartis’s executive committee.
“Richard Francis stepped down in March of this year at the end of a five-year term, for personal reasons. Francesco Balestrieri succeeded him on an ad-interim basis, pending finalization of the announcement (in April) that Richard Saynor would return to Sandoz as CEO, a role he assumed on 15 July. We are very pleased to have Richard back at Sandoz," the spokesperson said.
Aurobindo’s acquisition plans included a portfolio of oral solid products, along with its commercial and manufacturing infrastructure, which would propel Aurobindo to the second position in the dermatological drugs segment, and as the second largest generics company in the US by prescriptions, behind Israel’s Teva Pharmaceutical Industries Ltd.