Edicts by the Federal Trade Commission (FTC) on Teva Pharmaceutical Industries Ltd.'s takeover of Actavis plc meant a windfall for Mayne Pharma Ltd., President Stefan Cross told BioWorld Today. "It's put us in another league," he said. "All of a sudden we have a profile in the U.S.," where he leads operations.

The specialty pharma, with offices in Raleigh, N.C., and Melbourne, Australia, paid $652 million to take ownership of 37 approved and five filed generic drugs that had to be shed in what's described as the largest such divestiture to be overseen by the FTC, with Mayne bringing aboard the greatest share of products of the 11 buyers.

Petah Tikva, Israel-based Teva has just finished the $40.5 billion takeover of Dublin-based Allergan plc's generics arm Actavis, and disclosed that it's taking Allergan plc's distributor for such products, too, paying $500 million. The move will generate about $1.5 billion in third-party net income, Teva said, and lets Allergan continue tightening its focus on branded drugs. A year ago, Teva agreed to acquire the Actavis generic business from Allergan, and the European Commission gave its blessing eight months later, subject to divestitures of certain products sold in 24 European countries. The FTC's ruling in this regard, made last week, added to the package of assets for Teva to surrender and covers rights to 79 products marketed or in development in the U.S. (See BioWorld Today, July 28, 2015.)

"Every product [gained in the buy] is in our warehouse as of this morning," Cross said. "We've been very actively working through the supply-chain process in the last few weeks to have customer supply uninterrupted, and working with customers over the last two weeks to notify them of this transaction." About 70 bidders on the products in question "got shortlisted down to about a dozen," which was then reduced to five, he said. "In the end, only two parties were asked to present to the FTC, us and one other company." Officials had to convince the FTC that Mayne was "credible, that we could take on the responsibility of this basket of products. They wanted to make sure that Mayne had the technical capability to transfer the products into our operations and that we had the commercial capability to distribute [those] products in the U.S., as well." FTC interrogators were "honing in on our financial capability," too, he said. "We spent quite a bit of time on those three areas working with the FTC in late December and January. We all expected this deal to close much sooner than it did, Teva particularly. "

The FTC has been more rigorous in shaking out such deals lately. Law firm Dechert LLP analyzed recent reviews of generic-drug mergers and found that the Teva deal with Allergan to take over Actavis "stands out [in] several dimensions." From 2014 to the present, the FTC has taken enforcement actions against 15 generic drug mergers. "Compared to the other 14, Teva/Actavis took longer, involved many more products, and required more buyers," Dechert pointed out in a publication. Specifically, federal gatekeepers took 12 months to check the boxes on the deal, compared to an average of 5.9 months, and the FTC's requirement that Teva say goodbye to 79 products far outstrips what's been demanded of the average: 3.4 products. While 11 buyers fed off Teva's list, the average is 1.4.

MYLAND/MEDA DEAL GETS THE BUSINESS, TOO

Morningstar analyst Michael Waterhouse, when the FTC "finally signed off" on the Teva/Actavis transaction last week, said in a research report that he and his peers "continue to view Allergan and Teva as undervalued names" and Allergan "remains a particularly compelling investment opportunity, in our view, thanks to the company's wide economic moat, strong growth outlook, and potential for capital deployment to significantly boost earnings." Allergan "is the bigger winner from this transaction," in his view, with the massive cash infusion, of which $20 billion will remain after management executes its plan to pay off $10 billion in debt and conduct a $10 billion share repurchase. The firm "now has broad array of options to layer in new products into its core therapeutic franchises," Waterhouse said, adding that he would not "rule out the possibility of a large acquisition, but we think past deals for assets, such as Kybella ([deoxycholic acid] for chin fat removal) and Viberzi ([eluxadoline] for irritable bowel syndrome with diarrhea), suggest plenty of options remain for compelling smaller transactions and partnerships." (See BioWorld Today, April 30, 2015, and May 29, 2015.)

Higher-priced products, of course, often compel such deals. And "while much attention is paid to branded drug prices, the FTC has also intensified its focus on generic drug pricing," noted the Dechert law firm. "This is reflected not only in the settlement of the proposed Teva/Actavis transaction, but also in the commission's statement explaining the grounds for its action." The FTC took a hard look at "the potential effects of bundling drug portfolios, reduced incentives to challenge brand drug patents, and the possible lessening of competition in complex generics." Regulators also put under the eyeglass situations where manufacturers have exited the relevant market yet still hold an abbreviated new drug application, have a pending application, or haven't even applied for one. In the case of Teva/Actavis and others lately, the FTC "focused significantly on potential competition between the merging parties" – competition now and potentially, Dechert said, and the perspective reaches "far back into the drug development pipeline." Divestitures have been required when the number of competitors drops from five to four; with Teva/Actavis, products had to be given up in 20 such markets.

The deal when disclosed surprised some Allergan watchers, and came along with the decision to add a late-stage depression therapy in a bolt-on acquisition, as the firm bought Evanston, Ill.-based Naurex Inc. for $560 million up front, plus potential milestone payments. Included was phase III-ready rapastinel (GLYX-13), a once-weekly intravenous molecule. Allergan had a busy few months last summer, including the $2.1 billion acquisition of aesthetic biotech Kythera Biopharmaceuticals Inc., of Los Angeles, the buyout of medical device firm Oculeve Inc., of South San Francisco, and a $250 million deal to acquire Kenilworth, N.J.-based Merck & Co. Inc.'s small-molecule oral calcitonin gene-related peptide receptor agonists for migraine. (See BioWorld Today, June 18, 2015.)

Also subject to FTC rulings last week was generics specialist Mylan N.V.'s $9.9 billion cash-and-stock takeover of Solna, Sweden's Meda AB, made public in February. The buyout creates a behemoth of branded, generic, and over-the-counter drugs, and would let Mylan, of Canonsburg, Pa. – already in India, Brazil and Africa – enter new markets such as China, Southeast Asia, Russia, the Middle East and Mexico.

The feds are requiring Mylan to divest rights to two generic drugs in order to settle FTC charges that its proposed deal would be anticompetitive. Specifically, the order is intended to preserve competition in the markets for 250-mg generic carisoprodol tablets, which treat muscle spasms and stiffness, and for 400-mg and 600-mg generic felbamate tablets, which treat refractory epilepsy. Without a remedy, the FTC said, the acquisition would combine two of three companies currently offering 400-mg and 600-mg generic felbamate tablets, likely leading consumers to pay higher prices, and would eliminate future competition between Mylan and Meda in the market for 250-mg generic carisoprodol tablets. Under the terms, Pine Brook, N.J.-based Alvogen Pharma Inc. would acquire all of Mylan's rights and assets related to 400-mg and 600-mg felbamate tablets. The proposed order would also cause Mylan to provide transitional services and take all actions that are necessary for Alvogen to win FDA approval to manufacture and market 400-mg and 600-mg generic felbamate tablets. (See BioWorld Today, June 24, 2014, and Feb. 11, 2016.)