On Wednesday, May 2, 2018, Fresenius made some allegations that shed light on why the company sought to terminate its acquisition of Akorn, Inc., including allegations that a top Akorn executive knowingly submitted false and fabricated data to the United States Food and Drug Administration (FDA). Fresenius alleged that it uncovered “blatant fraud at the very top level” of Akorn, after Fresenius had agreed to acquire Akorn for $4.75 billion.
Allegedly, a top Akorn executive vice president for quality assurance knowingly directed the submission of fraudulent testing data to the FDA as part of an application to market the antibiotic azithromycin in 2012.
In addition to the named antibiotic azithromycin, Fresenius alleged that the “same scheme has infected” at least five other Akorn products, leading to “stunning evidence of blatant and pervasive data integrity violations.”
On an earnings call with investors and analysts, Fresenius’ CEO Stephan Sturm noted that an audit “reveal[ed] that Akorn repeatedly and consciously violated the FDA CGMP and data integrity requirements.” He went on to say, “Let me be clear: Akorn’s problems aren’t just simple operating issues that can be fixed in a matter of months or quarters. These violations affect the core of Akorn’s franchise, and they require a complete remediation of systems and data, and that will take years.”
Sturm also noted that Fresenius was ready to give Akorn more time to complete its investigation and present additional information, but Akorn refused – an action Sturm believes “speaks volumes.”
This is not the first time Akorn has been in hot water. In 2016, the FDA sent a Form 483 to Akorn’s Illinois-based sterile manufacturing facility, with six observations on quality control, deviations from written procedures, and a failure to investigate bath failures. In addition, Akorn’s India-based manufacturing facility has been on import alert since 2015.
Akorn spokeswoman Jennifer Bowles said the company “categorically disagreed” with the allegations and intended to enforce the merger agreement. In court documents, Akorn noted that it had investigated the possible submission of falsified data and fired an executive who was involved. “Critically, azithromycin and the five other drug products in question either have never been marketed or are not currently being marketed and were never forecasted to form a material portion of Akorn’s future earnings,” the company said in one of the documents.
According to a recent press release issued by Akorn, “Fresenius’ attempt to terminate the transaction on the pretext that the findings from the ongoing investigation are a breach of the merger agreement is completely without merit. The previously disclosed ongoing investigation, of which we have voluntarily notified and are in regular communication with the Food and Drug Administration, has not found any facts that would result in a material adverse effect on Akorn’s business and therefore there is no basis to terminate the transaction. The investigation is not a condition to closing and the only remaining condition is approval from the Federal Trade Commission. We intend to vigorously enforce our rights, and Fresenius’ obligations, under our binding merger agreement.”
Fresenius abandoned the merger agreement in April 2018, and Akorn has sued in Delaware Court of Chancery to try to hold Fresenius to the deal. The trial is set to begin July 9, 2018.