FTC Challenges Actavis Group's Proposed Acquisition of Abrika

The Federal Trade Commission today announced its challenge to the terms of Actavis Group hf.’s (Actavis) proposed acquisition of Abrika Pharmaceuticals, Inc. (Abrika), alleging that the transaction would create a monopoly in the U.S. market for generic isradipine capsules, a drug typically prescribed to patients to lower their blood pressure and also is used to treat hypertension, ischemia, and depression. Under a consent order that will allow the deal to proceed, the companies will divest all rights and assets needed to make and market generic isradipine capsules to Cobalt Laboratories, Inc. (Cobalt) within 10 days of the acquisition.
Actavis is a leading developer, manufacturer, marketer, and distributor of generic pharmaceutical drugs. Headquartered in Iceland, it sells generic products in more than 30 countries and has manufacturing facilities in Europe, the United States, and Asia. Abrika, based in Sunrise, Florida, develops specialty generic pharmaceuticals, including controlled release and immediate release products. Under a merger agreement announced on November 20, 2006, Actavis proposed to acquire all of the voting securities of Abrika for $235 million.

“Without the relief provided by the Commission’s consent order, Actavis would secure a monopoly in the market for generic isradipine capsules after acquiring Abrika,” said Jeffrey Schmidt, Director of the FTC’s Bureau of Competition. “The order will ensure that consumers have continued access to competitively priced capsules of this important generic drug.”

According to the FTC’s complaint, the proposed acquisition would violate Section 5 of the FTC Act and Section 7 of the Clayton Act, as amended. Actavis and Abrika are the only two companies selling generic isradipine capsules in the United States, and the acquisition would cause significant harm to consumers in the U.S. market for its manufacture and sale.
The acquisition would eliminate Abrika as a competitor and create a monopoly for Actavis in the market for generic isradipine capsules. Evidence indicates that if there is more than one competitor in the market for a generic drug, consumers can negotiate lower prices. A reduction in the number of competitors in the generic isradipine capsules market, from two to one, would allow the merged company to exercise its unilateral market power to increase prices. The Commission contends that entry into the market for generic isradipine capsules would not be timely, likely, or sufficient to deter or counteract the anticompetitive impact of the acquisition as proposed.

The consent order with the Commission effectively remedies the competitive concerns outlined in the complaint. It requires Actavis and Abrika to divest certain rights and assets related to generic isradipine capsules to an FTC-approved buyer – specifically, Cobalt – within 10 days of the proposed acquisition. The Commission has determined that Cobalt is an acceptable acquirer of the generic isradipine capsules assets, as it has experience in distributing and marketing generic drugs in the United States and to date has received FDA approval for nine other generic drugs. In addition, the sale to Cobalt does not raise any new competitive concerns, as Cobalt is not currently in the market for generic isradipine capsules and does not plan to enter. Finally, Cobalt will be able to restore the competition lost in the market for generic isradipine capsules following Actavis’ acquisition of Abrika.

To ensure the divestiture is successful, the order also requires Abrika to transfer its supply arrangement for generic isradipine capsules to Cobalt. Actavis and Abrika will transfer all confidential businesses information related to the product to Cobalt and will provide technical assistance to Cobalt to allow it to sell generic isradipine capsules. Finally, the Commission has appointed Denise F. Smart as an interim monitor to oversee the asset transfer and to ensure Actavis and Abrika comply with the terms of the consent order pending the divestiture to Cobalt.

The Commission vote to approve the consent order was 5-0. The order will be subject to public comment for 30 days, until May 14, 2007, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

(FTC File No. 071-0063)