Aurobindo terminates $900-million Sandoz product acquistion deal

Indian drug major Aurobindo Pharma Limited on Thursday announced the termination of the $900-million buy-out agreement it had entered with Sandoz Inc for US generic oral solids and dermatology business back in September 2018.

A mutual decision to terminate the agreement was taken as the approval from the US Federal Trade Commission was not obtained within anticipated timelines, Aurobindo said in a filing.

Even though the wait for the regulatory nod to conclude the transaction had got stretched beyond multiple time-lines in the past 19 months, the Thursday's announcement came as a bit of a surprise. The Aurobindo leadership as recently as in in the first week of February said they were about to get the necessary approvals in a month or two. The company had actively pursued the deal till the last minute.

The transaction would have not only been the biggest among Aurobindo's previous acquisitions but also would have seen more than doubling of its US revenues on a consolidated basis surpassing $ 2 billion, had it been concluded.

Focussed on further expanding its US business, Aurobindo had entered into a deal to buy Sandoz's dermatology business and a portfolio of oral solids comprising 70 percent of the products on offer for divestment by the Novartis AG's subsidiary.

The proposed deal also included three manufacturing facilities in the US, and 100 percent share-holding in Sadoz's subsidiary Eon Labs besides 300 products among several authorised generics, in-licensing products and branded dermatology products.

Talking to analysts on February 7, Aurobindo chairman P V Ram Prasad Reddy said they were hoping to receive the approval for Sandoz deal in the same month, while MD N Givindarajan explained that the approval would not stretch beyond March, 2020 as it was in the final leg. The company was preparing to present the consolidated financials from April 1.

With the deal being off the table, Aurobindo will lose an up front opportunity to become the second largest generics player in the US, though its aim to become debt-free would be achieved quicker than anticipated now as the transaction was to be funded through debt.

Aurobindo had reported Rs 16,993 crore in consolidated revenues for the nine on period ending December 2019, almost half of it generated from the US business.