FTC Clears AbbVie's $63 Billion Allergan Acquisition with Asset Divestiture Requirements
Key Insights
The Federal Trade Commission (search) has approved AbbVie (search)'s $63 billion acquisition of Allergan after requiring the divestiture of key assets to preserve competition in specific therapeutic markets.
AbbVie (search) and Allergan must divest Allergan's EPI treatment drugs Zenpep and Viokace to Nestlé, as the companies currently control 95% of the exocrine pancreatic insufficiency (search) drug market.
The companies are also required to transfer brazikumab, an investigational IL-23 (search) inhibitor for Crohn's disease (search) and ulcerative colitis (search), to AstraZeneca to maintain future competition in inflammatory bowel disease treatments.
The Federal Trade Commission (search) has cleared AbbVie (search) Inc.'s $63 billion acquisition of Allergan plc after imposing significant divestiture requirements designed to preserve competition in critical therapeutic areas. The approval comes following an extensive ten-month investigation that examined potential antitrust violations in markets for exocrine pancreatic insufficiency (search) treatments and inflammatory bowel disease therapies.
Asset Divestitures Required for Market Competition
Under the proposed consent agreement, AbbVie (search) and Allergan must divest several key assets to address competitive concerns. Allergan's EPI treatment drugs Zenpep and Viokace will be transferred to Nestlé S.A., while the investigational IL-23 (search) inhibitor brazikumab will return to AstraZeneca plc.
The FTC's investigation revealed that only four companies currently sell pharmaceutical products to treat exocrine pancreatic insufficiency (search), with AbbVie (search) and Allergan together controlling 95 percent of this market. The condition results in patients' inability to digest food properly, making effective treatment options critical for patient care.
"Following an extensive investigation, the FTC alleges that the proposed acquisition would likely result in substantial competitive harm to consumers in the market for treatment of exocrine pancreatic insufficiency (search)," the Commission stated in its announcement.
IL-23 Inhibitor Competition Preserved
The divestiture requirements also address future competition in the IL-23 (search) inhibitor market for treating moderate-to-severe Crohn's disease (search) and ulcerative colitis (search). Currently, Johnson & Johnson's Stelara represents the only FDA-approved IL-23 inhibitor treatment for both conditions, with limited effectiveness noted in existing therapies.
Only three other companies—AbbVie (search), Allergan, and Eli Lilly and Company—have IL-23 (search) inhibitors in late-stage development. The transfer of brazikumab back to AstraZeneca, which originally developed the compound before licensing it to Allergan in 2016, is designed to maintain competitive dynamics in this emerging therapeutic class.
Comprehensive Investigation Process
The FTC's investigation involved reviewing more than 430,000 documents and conducting over 40 interviews with industry stakeholders. Commission staff explored various theories of competitive harm, including potential impacts on innovation, but found no evidence of additional concerns beyond those addressed by the proposed consent order.
The investigation included coordination with international competition enforcement agencies in Canada, the European Union, Mexico, and South Africa. The Commission worked particularly closely with European Commission staff to analyze proposed remedies.
Buyer Vetting and Market Readiness
The Bureau of Competition conducted extensive vetting of the proposed divestiture buyers to ensure their ability to maintain competition. Nestlé operates Nestlé Health Science, a multinational integrated health company focused on nutritional products, including treatments for gastrointestinal disorders. The FTC concluded that Nestlé Health Services possesses the necessary expertise, U.S. sales infrastructure, and resources to preserve competition in the EPI market.
For brazikumab, the consent agreement returns the product to AstraZeneca under terms designed to incentivize bringing the treatment to market, ending the existing licensing agreement with Allergan.
Transaction Modifications and Timeline
As part of the settlement, AbbVie (search) and Allergan have amended their transaction agreement to provide that only one Allergan director will join the AbbVie board following the acquisition's completion. Allergan's current chairman and CEO Brent Saunders has elected not to join the AbbVie board to maintain flexibility for pursuing other opportunities in the pharmaceutical sector.
The Commission vote to issue the complaint and accept the proposed consent order was 3-2, with Chairman Joe Simons and Commissioners Noah Joshua Phillips and Christine S. Wilson supporting the decision. Commissioners Rohit Chopra and Rebecca Kelly Slaughter issued dissenting statements.
The acquisition's closing remains subject to customary closing conditions and Irish High Court approval, with a hearing scheduled for May 6, 2020. The FTC's acceptance of the proposed consent order satisfies all required antitrust clearances needed for the transaction to proceed.