FTC Pressures Warner Chilcott

Shares of Warner Chilcott(WCRX Quote) dropped Tuesday as the Federal Trade Commission stepped up its criticism of a deal between the drugmaker and Barr Pharmaceuticals(BRL Quote).

The FTC, 34 states and the District of Columbia previously sued Warner Chilcott for what they allege was an anticompetitive agreement in which Barr was the sole supplier to Warner Chilcott of an oral contraceptive called Ovcon 35. Earlier this month, Warner Chilcott stopped shipping Ovcon 35 and began replacing it with a chewable version of the contraceptive.

Shortly after midnight Tuesday, Warner Chilcott issued a press release saying that the FTC had filed a new legal motion which said the company's strategy would harm consumers because the Barr deal blocked the selling of a generic version of Ovcon 35. The FTC sought a preliminary injunction requiring Warner Chilcott to continue shipping Ovcon 35.

Ten hours later, Barr said Warner Chilcott had granted a waiver to their agreement, enabling Barr to sell a generic version of Ovcon 35. The waiver was signed Monday. Barr will begin selling the generic contraceptive, under the brand name Balziva, in October. Barr says Ovcon 35 produced $95 million in sales for the 12 months ended July 31.

The announcements pushed Barr's stock up 95 cents, or 1.9%, to $51.91 by the afternoon Tuesday. Warner Chilcott's stock lost $1.90, or 12.7%, to $13.06.

The news was the second disappointment for investors in Warner Chilcott, a Hamilton, Bermuda-based maker of women's care drugs and dermatology products. The company went public last week at $15 a share, less than the $17 to $19 range that underwriters had proposed. The company, which had sales of $515 million last year, raised about $1.06 billion in its IPO.

Warner Chilcott also said it will contest the new complaint by the FTC "vigorously." Because FTC's initial complaint focused primarily on the provisions with Barr that now have been waived, Warner Chilcott says it will seek to dismiss the FTC complaint.