Allergan/Actavis: Restasis emerges as possible antitrust concern, industry sources say
Allergan’s (NYSE: AGN) USD 66bn friendly takeover by Actavis (NYSE:ACT) appears to have resulted in a combination with little apparent overlap, but one branded ophthalmology drug, Restasis, may draw the attention of the Federal Trade Commission (FTC), industry sources said.
Actavis CEO Brent Saunders said Monday the combined company expects to retain its generics business and intends to compete in dermatology, urology and neuroscience, though some sales force overlap exists in the latter three markets. Actavis also gains Allergan’s ophthalmology portfolio through the transaction.
Allergan has been marketing Restasis for 10 years and it previously provided guidance that the drug will post sales between USD 1.03bn and USD 1.07bn in 2014. Actavis has an Abbreviated New Drug Application (ANDA) on file to produce a generic version of Restasis and has been working with the FDA to accept its ANDA filing on Restasis. In pharmaceutical mergers involving the combination of a branded drug and generic drug, the FTC generally exercises more scrutiny, said a pharmaceutical banker.
When there is uncertainty about the ANDA or the outcome of associated litigation, the past practice of the FTC has been for the commission to investigate that overlap and eventually force the company to relinquish its claims, said a DC-based antitrust attorney who has studied the deal. Actavis could emerge as a first filer on Restasis and gain the six-month exclusivity period for a generic version of Restasis, said the attorney. Because of the pending ANDA, the attorney said the transaction could require a quick second request and a formal divestment process, likely to be completed in four to five months, said the source. These types of situations go really quick, particularly with Actavis, he noted.
In areas where the Actavis and Allergan’s drug portfolios overlap, the products tend to be generic and are marketed in specific geographies, said the pharmaceutical banker. Generic pharmaceuticals cannot command premium pricing and always face strong market competition. As a result, past mergers of generic companies have not received much scrutiny from the FDA, said the banker.
Saunders also said Monday there were “no sacred cows” among products within Actavis or the new combined company. In areas in which the new company expects it cannot be competitive, Actavis would evaluate if certain drugs would be “more valuable” in the hands of another company, said the CEO on the conference call.
The transaction is subject to the approval of the shareholders of both companies, as well as customary antitrust clearance in the US, the EU and “certain other jurisdictions,” and is anticipated to close in the second quarter of 2015.
JPMorgan is serving as exclusive financial advisor to Actavis and Cleary Gottlieb Steen & Hamilton LLP is serving as Actavis’ lead legal advisor. Allergan is being advised by Goldman Sachs, BofA Merrill Lynch, Latham & Watkins, Richards, Layton & Fingerand Wachtell, Lipton, Rosen & Katz.
A source close to the deal would only comment to say no major issues are expected.
Requests to the company comment were not immediately returned.