Health and Science

Fresenius shares rally after it ditches Akorn takeover

Key Points
  • Fresenius said it had decided to pull out of its planned acquisition of Akorn.
  • The German health-care group said it found data integrity breaches at the U.S. generic drugmaker.
  • Fresenius agreed last year to buy the U.S. maker of liquid generic drugs for about $4.75 billion.
Source: Akorn

Shares in health-care group Fresenius jumped as much as 3.9 percent after it pulled out of the $4.75 billion acquisition of Akorn, with analysts saying it was extricating itself from taking on an underperforming business.

Germany's Fresenius on Sunday cited evidence of misconduct in the target's reporting of drug development data to U.S. health-care regulators, but analysts pointed to investor relief because Akorn's business had deteriorated.

"Investors will likely be pleased that the merger agreement has been terminated, given the substantial decline in Akorns operating performance since the agreement was signed last April," said Berenberg analyst Tom Jones.

Fresenius shares were up 0.8 percent at 0906 GMT.

Generic drugmaker Akorn was burdened last year by supply disruptions and competition for a range of products, such as ephedrine injections for low blood pressure under anesthesia and lidocaine anesthetic ointment.

Fresenius warned in November that weakness at Akorn could continue into 2018, but at the time reaffirmed the logic behind the deal.

The German company said in February that it could terminate the deal after investigating alleged breaches of U.S. Food and Drug Administration (FDA) data integrity requirements.

"We have found proof of material breaches of FDA data integrity requirements in Akorn's operations, including product development," Fresenius said on Sunday, adding that Akorn also violated other requirements of the merger agreement.

Fresenius on Monday ruled out seeking a new deal on more favorable terms after an analyst discussed the possibility in a research note.

Akorn said it disagreed with the accusations by Fresenius and planned to "vigorously" enforce its rights and Fresenius's obligations, with analysts predicting a legal dispute.

Fresenius had hoped the acquisition of Akorn would help it to offer a wider choice of drugs to hospitals and pharmacies, who tend to favor large suppliers.

A spokesman on Monday said that its Kabi subsidiary, a maker of generic drugs for injection and infusion, would expand its existing business to reach that goal.

"This can of course be accelerated via acquisitions." the spokesman said.

In another reversal, the German group's subsidiary Fresenius Medical Care (FMC) struck a deal on Saturday to sell its majority stake in Sound Inpatient Physicians Holdings for $2.15 billion, less than four years after buying it.

The shares dropped 3.6 percent as the group also cut its 2018 sales target because of lower reimbursement of calcimimetic drugs at its dialysis service business in the United States.

FMC had bought Sound Inpatient under a drive to build up a so-called care coordination business to expand into other types of therapy that kidney dialysis patients typically need.

An FMC spokesman said the group would continue to invest in care coordination because the U.S. healthcare system encourages care providers to manage patient treatment more comprehensively under the so-called value-based care approach.