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Watson to sell manufacturing tech to seal $5.9B Actavis deal

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By Nick Taylor

Watson Pharmaceuticals is set to sell manufacturing technology for 18 drugs to meet conditions on its $5.9 billion takeover of Actavis. Par Pharmaceuticals and Sandoz are poised to snag the products, which Watson ($WPI) must sell to meet Federal Trade Commission conditions of its takeover.

By forcing the sale of the 18 products, the FTC aims to lessen fears the merger will cut competition. Par is poised to buy manufacturing and marketing rights for 14 current and pipeline products--including a generic of Shire's ($SHPG) ADHD drug Adderall XR--with Sandoz nabbing the other four.

Watson must sell the products and begin transferring manufacturing technology within 10 days of closing the takeover, which it now expects to occur within weeks. Actavis must also amend its research and manufacturing deal with Pfizer ($PFE). The Icelandic drugmaker is waiving rights tied to Loxatine and Dynacirc and giving up first refusal on an authorized generic of Pfizer's acute pain drug Embeda.

The actions are intended to widen the pool of manufacturers supplying certain generics. Taking Embeda as an example, Watson is one of a small number of generics manufacturers likely to overcome the technical barriers to entry presented by an anti-abuse pain medication. Buying Actavis reduces the potential field of competitors, so the FTC is making it give up the option on an authorized generic.

Doing so lessens the likelihood a lack of competition will keep generic prices high. It also means other manufacturers can pick up the slack if one company has supply problems. While pricing was the main consideration for the FTC, drug shortages were also taken into account. Watson and Actavis both manufacture drugs that are in short supply, but the FTC concluded that the takeover is unlikely to exacerbate the problem.

- here's Bloomberg's take
- read the FTC press release
- find out more in the consent order

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