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Hikma bolsters injectables franchise with $425M deal for Custopharm, but FTC review looms

Generics giant Hikma is boosting its injectables business to nearly 130 products in the U.S. by way of dealmaking.

For $375 million upfront and another $50 million in milestone payments, Hikma is buying U.S. generic injectable player Custopharm, the U.K. company unveiled Monday.

With the acquisition, Hikma looks to gain 13 FDA-approved products, including four first-to-market generics, plus several pipeline programs. Hikma expects the Custopharm portfolio to generate 2021 revenues of over $80 million.

Before the deal wraps up, though, the transaction is up for antitrust review with the U.S. Federal Trade Commission. The proposed merger comes at a time of increased scrutiny on biopharma’s M&A.

One recent generics deal that the FTC effectively derailed was Novartis’ sale of Sandoz U.S. generics portfolio and dermatology business to India’s Aurobindo Pharma. The two firms abandoned the transaction early last year after an extended FTC review.

Hikma’s Custopharm purchase is much smaller in size compared with the Sandoz-Aurobindo tie-up, but the deal must clear an even more vigilant FTC, which has sworn to revamp how it evaluates pharma dealmaking.

The now Democrat-led FTC has argued that large pharma mergers can lead to high drug prices and embolden tactics that hurt competition. Officials from the agency have also suggested that the FTC might take a pharma company’s track record on anticompetitive practices into consideration when reviewing deals.

Plus, in an executive order in July, President Joe Biden asked the FTC to take a hard look at its antitrust review practices. The order singled out the “pay for delay” agreements that brand-name drugmakers often use to push off generic entry.

Hikma, from the generics side, has faced its fair share of antitrust allegations related to pay-for-delay deals. These include an ongoing class-action suit accusing Jazz Pharmaceuticals of paying several generic makers, including Hikma, to stave off competition to its popular excessive daytime sleepiness drug Xyrem.

Amid increased U.S. pricing pressure on generics, drugmakers have been turning to harder-to-make injectables and biosimilars for growth. Injectables have been doing well for Hikma; last year, their sales grew 10% year-over-year to $977 million for the company, with about 68% from the U.S. As Hikma noted in its 2020 annual report, it’s the third-largest generic injectable player in the U.S.