• FTC approves deal for Allergan’s generic drug-making unit
  • Agreement requires largest divestiture ever for pharma deal

The U.S. Federal Trade Commission approved Teva Pharmaceutical Industries Ltd.’s $40.5 billion purchase of Allergan Plc’s generic drug-making unit after the companies agreed to the biggest divestiture ever in a pharmaceutical merger to preserve competition.

The companies agreed to sell 79 existing and future drugs including anesthetics, antibiotics, weight-loss drugs and oral contraceptives to 11 rival firms to win approval, according to an FTC statement Wednesday. The divestitures must be completed 10 days after Teva’s acquisition of Allergan’s generics unit, Actavis Inc., is complete, the commission said.

“Millions of Americans rely daily on generic drugs to treat a wide range of illnesses,” said Debbie Feinstein, director of the FTC’s Bureau of Competition. “The FTC’s settlement safeguards the competitive availability of these medications for patients across the country who depend on them.”

In a string of tie-ups in the pharmaceutical industry over the past few years, antitrust agencies on both sides of the Atlantic have etched out a general road map for companies seeking approval, requiring them to divest any drugs where competition would be lost.  

The tie-up didn’t present broader harm to competition beyond the individual product markets, the FTC said in a separate statement explaining the rationale for its decision. The generic market remains relatively unconcentrated, with more than 200 companies selling generic drugs in the U.S., the agency said.

“This acquisition is a transformative step for Teva as we continue to claim a differentiated space in the global pharmaceutical industry,” Chief Executive Officer Erez Vigodman said in a statement. The Parsippany, New Jersey-based Allergan declined to comment. 

Allergan shares rose 4.5 percent to $260.24 in New York trading, while Teva climbed 1.6 percent to $55.16.

The 11 companies that agreed to acquire the divested products are Mayne Pharma Group Ltd., Impax Laboratories Inc., Dr. Reddy’s Laboratories Ltd., Sagent Pharmaceuticals Inc., Cipla Limited, Zydus Worldwide DMCC, Mikah Pharma LLC, Perrigo Pharma International D.A.C., Aurobindo Pharma USA Inc., Prasco LLC and 3M Company.  

Europe, Middle East

The merging companies had already offered to sell drug portfolios in Europe and the Middle East to win antitrust approval from regulators in those regions. 

Teva’s purchase of Actavis, announced in July 2015, received approvals from the European Commission in March and from Brazil’s antitrust regulator last year.

Now Teva can shift its efforts toward integrating Actavis into its overall business and capitalizing on the rapid rise in annual sales and profit the Petach Tikva, Israel-based company forecast this month. The deal will make Teva the world’s largest maker of generic medicines and give it greater negotiating power with governments and health insurers.

The acquisition should close within about 10 days of the FTC’s approval, David Stark, Teva’s general counsel for global markets, told analysts on July 13.

In other pharmaceutical approvals, the FTC and the European Commission in 2009 approved Pfizer Inc.’s acquisition of Wyeth LLC, after forcing it to sell several types of animal health vaccines. The agencies also approved Pfizer’s $17 billion acquisition of Hospira Inc. in 2015 after it agreed to sell off some sterile injectable drugs and its infliximab biosimilar drug, which was under development for treatment of Chrohn’s disease.

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