Mylan's Fight for Perrigo Costs the Pharma its Rights to 7 Generics

A settlement with the FTC removes one more hurdle before the hostile bid; Mylan must divest seven generic drugs as a condition of the commission's approval of Perrigo bid.
By William McConnell ,

Mylan  (MYL) - Get Report on Tuesday agreed to divest seven generic drugs as a condition of Federal Trade Commission approval for the company's unsolicited $34 billion offer for Perrigo (PRGO) - Get Report . The drugs will be sold to Alvogen Group, a New Jersey-based generic pharmaceutical company.

The price Alvogen is paying was not disclosed.

The FTC approval removes the last regulatory hurdle for Mylan in the takeover fight. The company has set a deadline of 8:00 a.m. EDT, Nov. 13 for Perrigo stockholders to tender their shares.

"We are delighted to have received FTC clearance, making our offer for Perrigo now unconditional other than the one final step, which now rests solely in the hands of Perrigo shareholders," Mylan executive chairman Robert Coury said in a prepared statement. "We are very confident that Perrigo shareholders will support this transaction."

Previously Mylan said it may have to divest as many as 13 drugs in order to win antitrust clearance.

In a letter to shareholders, Perrigo reiterated its call for investors to ignore Mylan's overture. Mylan "has taken a deceptive approach to convince you to tender your shares into its value-destructive offer for Perrigo," wrote Perrigo chairman and CEO Joseph C. Papa. "I am writing to urge you to ignore the contrived reasoning and NOT tender shares into Mylan's grossly inadequate offer."

The FTC alleged that the proposed acquisition would likely have harmed current competition in U.S. markets for four generic drugs that the companies are either currently selling or have approval from the Food and Drug Administration to sell. The drugs are bromocriptine mesylate, used to treat conditions including type 2 diabetes and Parkinson's disease; clindamycin phosphate/benzoyl peroxide, used to treat acne; liothyronine sodium, used to treat hypothyroidism and to treat or prevent enlarged thyroid glands; polyethylene glycol 3350 is a laxative used to treat occasional constipation.

The FTC's settlement also covers three generic drugs still in development: acyclovir, being developed to slow the growth and spread of the herpes virus in the body; hydromorphone hydrochloride, hoped to be used to treat moderate to severe pain in narcotic-tolerant patients; and scopolamine, which is meant to prevent symptoms associated with motion sickness and helps patients recover from anesthesia and surgery. Regarding those last three drugs the FTC said the proposed acquisition would eliminate at least one of "a very limited pool of future entrants."

The FTC said Alvogen, the proposed buyer, has the necessary financial and technical capabilities and experience marketing generic pharmaceutical products to successfully replace the competition that would have been lost through the proposed acquisition.

Private equity shop CVC Capital Partners led a consortium that bought a majority stake in Alvogen in a secondary buyout from Pamplona Capital in June. The investment reportedly valued the target at $2 billion. Other buyers included Singapore sovereign wealth fund Temasek Holdings and Vatera Healthcare Partners. Alvogen is based in Luxembourg but operates out of Pinebrook, N.J., and was founded in 2009. It specializes in difficult-to-make drugs.

Alvogen has made expansion in Asia a particular focus and has undertaken three acquisitions there in the last three years.

To further ensure that the divestitures succeed, the FTC's proposed order requires Mylan to provide Alvogen with transitional services, including technical assistance while Alvogen enters the new markets. The commission voted 4-0 to issue the complaint and proposed settlement. The agreement is subject to a 30 day comment period ending Dec. 3, after which the commission will vote on whether to make the proposed consent order final.

Loading ...