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Data integrity scuppers Fresenius deal with Akorn

However Fresenius could be liable to pay $129m in termination fees

Fresenius

German healthcare group Fresenius Kabi has abandoned plans to acquire US generic and over-the-counter drugmaker Akorn in a $4.3bn deal, citing FDA compliance issues.

The decision came after Akorn failed to fulfil “several closing conditions” for the takeover it said, but the main reason seems to be “material breaches” by Akorn of the FDA’s data integrity requirements. Akorn is furious about the decision, and says it intends to hold Fresenius to its obligations under the merger agreement.

The tie-up between the two companies - first announced a year ago - has looked vulnerable for several weeks. Fresenius raised the data integrity question and said it was launching an investigation into the matter. Back in February, the company indicated that it didn’t think the problems were severe enough to pull back from the takeover.

After completing its probe, Fresenius says the breaches were sufficiently serious to allow it to exit the agreement. It also claims it offered Akorn an opportunity to carry out its own investigation and present evidence to the contrary, adding it had declined to do so.

The US regulator published new guidance on data integrity in 2016, and over the last several years it has become one of the most common reasons for the agency to issue notification of compliance issues or warning letters to pharma manufacturers.

As is generally the case when deals go sour, attention is now focused on the exit terms of the agreement, and specifically whether Fresenius can walk away without penalty or whether Akorn can claim a termination fee, which in the original merger agreement was valued at $129m.

In a strongly-worded statement, which suggests legal challenges may follow, Akorn says it “categorically disagrees with Fresenius’ accusations” and claims that the investigation “has not found any facts that would result in a material adverse effect on Akorn’s business and therefore there is no basis to terminate the transaction”. It says it also intends to enforce its right under the “binding merger agreement”.

Fresenius said it does not expect the termination of the deal to have an impact on its 2018 guidance, and it still expects sales growth of 5-8% and an increase in net income of 6-9% in constant currencies.

At the time the merger was announced, Fresenius said the transaction would strengthen and diversify both businesses, and expand the range of dosage forms they could offer as well as open up new markets in ophthalmology and veterinary medicine. The company has indicated it is still interested in pursuing deals that will expand its presence in the US generics market.

Article by
Phil Taylor

23rd April 2018

From: Sales

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