AbbVie's Allergan Aesthetics business in FTC crosshairs over $550M Soliton acquisition


AbbVie’s medical aesthetics division Allergan may not get the makeover it was counting on this year if the Federal Trade Commission (FTC) has anything to say about it.

The FTC has asked Allergan to submit additional information about its plan to buy devicemaker Soliton, according to documents Soliton filed with the Securities and Exchange Commission (SEC) on Aug. 6. The so-called “second request” indicates the FTC is launching a deeper probe than its standard review of merger proposals, sparked by potential antitrust concerns.

The second request comes nearly three months after Allergan announced its agreement to buy Soliton. At the time, the AbbVie subsidiary—which makes aesthetics-focused drugs and devices, including flagship product Botox—laid out plans to pay $550 million for Soliton and its FDA-cleared Resonic device, which emits acoustic shock waves to remove cellulite and tattoos.

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The deal would see Allergan shell out $22.60 in cash for each of Soliton’s outstanding shares, about a 25% bump over the company’s stock price at the time.

Though its shares proceeded to rise almost to that level in the months after the merger announcement, the FTC move has now changed that. When the market opened this week after the agency’s second request, Soliton’s stock had dropped to $21.24, its lowest point since the buyout plans emerged. AbbVie’s stock, meanwhile, remained largely unaffected by the agency probe.

The FTC said earlier this year that it would be reconsidering its reviews of certain mergers. It pointed to pharma deals as one particular type under its microscope, with acting FTC Chairwoman Rebecca Kelly Slaughter citing AbbVie's $63 billion acquisition of Allergan as one of the recent megamergers that inspired the heightened scrutiny.

According to Soliton’s 8-K filing, after both it and AbbVie submitted the required forms in June notifying the FTC and the U.S. Justice Department of their intent to combine, they engaged in “informal discussions” with the FTC. Ultimately, the companies voluntarily agreed to give the agency more time to review the merger, the filing said.

To do so, AbbVie withdrew its original merger notice and refiled it July 7. After the standard 30-day review period ended, however, the FTC still wasn’t ready to sign off on the merger, prompting its second request. That will extend the review period another 30 days, beginning after AbbVie and Soliton submit any additional information and documents requested by the FTC.

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In the SEC filing, Soliton noted that it and AbbVie “continue to work cooperatively with the FTC staff in its review of the proposed transaction” and said the companies are still sticking to their original timeline for the merger, which they expect to close in the second half of this year.

Still, the majority of second requests result in further legal challenges, according to agency data. From 2015 to 2019—the most recently reported data—between 62% and 89% of second requests led to challenged transactions.

The renewed 30-day review period could end in a handful of ways: The FTC may be satisfied by the additional submitted information and end the probe; AbbVie and Soliton could voluntarily agree to extend the review period once again; or the antitrust watchdog might decide to pursue a legal injunction to stop the merger from happening if it determines the acquisition would violate antitrust laws.

The last of those options is extremely rare—representing less than 1.9% of proposed mergers in fiscal year 2019—but does occur, as evidenced by the ongoing legal challenge to Illumina’s $8 billion plan to acquire cancer blood test developer Grail.