Ranbaxy-Sun U.S. approval hinges on selling antibacterial drug as FTC notes reach of Indian generic giant

SINGAPORE--Ranbaxy Laboratories will sell its generic minocycline antibacterial to Torrent Pharmaceuticals but otherwise is good to go with its merger with Sun Pharmaceutical, the U.S. Federal Trade Commission (FTC) has ruled. The unanimous decision paves the way for Sun to potentially complete the $4 billion deal with Ranbaxy parent Japan's Daiichi Sankyo by the middle of the month.

A unanimous FTC issued a consent order open for comments through March 3. After that, the agency is to decide whether to give the final order. The FTC was one of the last obstacles to completion of the huge merger deal. The order was issued just days before an India state court hearing on another lingering obstacle. If that is cleared, a Sun official has said the deal could close within weeks.

The size of the pending deal with Torrent was not reported. A Sun generic would compete in the U.S. with the Medicis drug Solodyn, Orapharma's Arestin and Minocin by Rempex Pharms. Teva Pharmaceutical Industries ($TEVA) and Par Pharmaceutical also have U.S. approval to market their generic versions.

The FTC said it required the divestiture because otherwise a combined Sun and Ranbaxy would control too much of that market, making it anticompetitive. It said Ranbaxy was one of only three bulk suppliers of the drug and Sun expected to market its own generic in the near future. The other two API suppliers are Dr. Reddy's Laboratories, also of India, and U.S-based Par.

The divestiture covers three dosage strengths of the drug that is popular for treating a variety of conditions, including acne, pneumonia and urinary tract infections. The consent decree requires the sellers to cooperate with Torrent to help it get marketing approval for minocycline within the same time frame it would have taken Ranbaxy to do so.

Torrent also currently lacks the manufacturing infrastructure to produce the tablets so the order to the consent agreement requires Sun and Ranbaxy to continue producing their generics and supplying them to Torrent so it can enter the markets while it gets its own manufacturing process up to speed and able to achieve FDA approvals.

The order requires the divestiture to Torrent and the sign-over of all Ranbaxy rights to minocycline to be completed within 10 days of completion of the acquisition. If the sale to Torrent cannot be completed, the FTC would give Sun 6 months after the consent order becomes final to find another buyer and complete the deal. The FTC said it also would appoint an interim monitor to see that the terms of the agreement are carried out.

Daiichi Sankyo agreed to the all-stock deal last year as FDA regulatory problems piled up for Ranbaxy, leading the agency to ban products from four of its 5 FDA-approved plants. The issues recently cost it a first-to-file 180 day exclusive to produce AstraZeneca's ($AZN) blockbuster heartburn medicine, Nexium, which the FDA granted to Teva instead. With the merger, Daiichi Sankyo will be Sun's largest shareholder with a stake of about 9%.

- here's the FTC announcement
- here's the FTC analysis
- here's the FTC complaint more from the FTC
- here's the settlement agreement

Special Report: Pharma's top 10 M&A deals of 2014's first half - 8. Sun Pharmaceutical/Ranbaxy Laboratories

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