(Reuters) - Novartis AG on Thursday scrapped the $1 billion sale of U.S. generic pill and skin drug assets to India's Aurobindo Pharma Ltd as regulators balked, setting back the Swiss drugmaker's shift to more profitable medicines.
The cancellation leaves hydroxychloroquine, an older malaria drug that Novartis Chief Executive Vas Narasimhan is touting as a potential coronavirus treatment, in its Sandoz generic unit's portfolio.
Novartis is donating 130 million hydroxychloroquine doses to support efforts against the epidemic, though the European Union has so far said there is no proof it works.
Novartis said the Aurobindo deal's collapse was not coronavirus-related, from its perspective, but stemmed from the U.S. Federal Trade Commission's not giving approval within expected timelines. The transaction was supposed to have been completed last year but was delayed repeatedly.
Narasimhan announced the transaction with India's Aurobindo in September 2018 as he hoped to shed generics assets in the United States that have faced fierce price pressure and dragged down Sandoz's profitability.
In 2019, the U.S. assets continued to weigh on Sandoz's performance, as the generics division's sales fell 1% to $9.7 billion as price erosion in the United States canceled growth elsewhere. Sales in the oral solids and skin business fell to $1.1 billion in 2019 from $1.2 billion in 2018.
Earlier this year, Novartis projected Sandoz's sales were expected to grow at a low-single-digit rate in 2020, excluding the U.S. oral solids and dermatology businesses. The company did not immediately update guidance now that Sandoz will continue to operate the assets within its U.S. business.
Though a tiny part of Sandoz's and other drugmakers' portfolios, hydroxychloroquine has been subject of intense attention after U.S. President Donald Trump touted it as a potential miracle cure against COVID-19.
The EU has sought to mute expectations, however, citing a lack of data on whether the drug works, but countries including India and Hungary have banned exports as trials are under way to assess its efficacy.
(Reporting by John Miller in Zurich and Philip George in Bengaluru; Editing by Shounak Dasgupta and Michael Shields)