US regulator puts conditions on Mylan's $1.6 bn acquisition of Arcolab's Agila unit

US regulators yesterday put conditions on the proposed $1.6-billion acquisition of Strides Arcolab's unit Agila Specialties Pvt Ltd by US generic and specialty pharmaceutical company Mylan Inc.

In August the Indian Prime Ministers office, the Foreign Investment Promotion Board and the Cabinet Committee on Economic Affairs had approved the deal without conditions (See: Mylan gets PMO nod to acquire Agila Specialities).

The US Federal Trade Commission (FTC) said that the companies will have to divest 11 generic injectable drugs as a condition of approving the deal.

Mylan has consented to the terms, which will be subject to public comment for 30 days, after which the FTC can decide to make the order final.

According to the FTC, in each of these 11 markets, Mylan and Agila are two of only a limited number of current or likely future competitors. 

It said that the number of suppliers in generic pharmaceutical markets matter because prices generally decrease as the number of competing generic suppliers increases and the 11 generic injectable drugs are highly susceptible to supply disruptions caused by the inherent difficulties of producing sterile liquid drugs. 

The FTC alleges that by reducing the number of competitors in these markets, the acquisition as originally proposed would eliminate important competition and likely lead to higher prices.

The assets to be divested are:

  1. Amiodarone hydrochloride injection, an anti-arrythmic heart drug used to treat patients with frequently recurring ventricular fibrillation or unstable ventricular tachycardia;
  2. Etomidate injection, an anesthetic used during surgery;
  3. Fluorouracil injection, which is used to treat several types of cancer, including breast and pancreatic;
  4. Labetalol hydrochloride injection, which is used to treat severe hypertension;
  5. Mesna injection, a detoxifying agent used to prevent urinary tract damage caused by a particular chemotherapy drug; and
  6. Methotrexate sodium preservative-free injection, which is used to treat several types of pediatric cancers, as well as certain autoimmune disorders.
  7. Acetylcysteine injection, which is used to prevent or minimize liver damage caused by acetaminophen overdose;
  8. Fomepizole injection, which is used to treat accidental poisoning caused by ethylene glycol or methanol;
  9. Ganciclovir injection, an antiviral drug used to treat patients with weakened immune systems to slow the growth of a form of herpes that can lead to blindness; and
  10. Meropenem injection, an antibiotic used as a last resort to treat serious bacterial infections in the ICU.
  11. Mycophenolate mofetil injection, used in transplant medicine to reduce the chance of organ transplant rejection.

In February, Pennsylvania-based Mylan agreed to buy Agila, the injectable drugs unit of Bangalore-based Strides Arcolab in order to expand its presence in the fast-growing generic injectables market. (See: Strides Arcolab sells Agila Specialties to Mylan for $1.6 bn 

The deal came seven years after Mylan paid $736 million (Rs3,424 crore) in cash to buy Hyderabad-based Matrix Laboratories, a leading producer of active pharmaceutical ingredients.

Agila (formerly Strides Specialties), was spun off as a separate division following a restructuring in 2009, and is a wholly-owned subsidiary of Strides Arcolab.

It focuses on key therapeutic areas like anti-infectives, oncology, CNS, GI, ophthalmics and peptides.

The acquisition will give Mylan a broad product portfolio of more than 300 filings approved globally and marketed through a network covering 70 countries, including 61 abbreviated new drug applications (ANDAs) approved by the US Food and Drug Administration (FDA).

Agila also has a global pipeline of approximately 350 filings pending approval, including 122 ANDAs awiting FDA approval.

The company currently produces products across nine high-quality manufacturing facilities in India, Brazil and Poland, eight of which have been approved by the FDA.

Agila's manufacturing capabilities include vials, pre-filled syringes, ampoules, lyophilization, cytotoxics, and antibiotics. Agila's manufacturing base represents one of the largest steriles capacity in India and one of the largest lyophilization capacities in the world.

In addition to its established presence in developed markets, Agila has a strong position in high-growth emerging markets, including Brazil.

Agila Specialties accounted for 74 per cent of Strides's earnings before interest, taxes, depreciation and amortisation in the nine months through September 2012, while sales jumped to Rs10,000 crore in the same period, from Rs7,400 crore a year earlier.

Mylan had said that Agila's capabilities complement its existing injectables platform of more than 500 products marketed globally, including 55 ANDAs, and its high quality sterile manufacturing facilities in Ireland and India.

It said that the global generic injectables market is expected to grow at a compound annual growth rate of 13 per cent from 2011-2017 driven by patent expiries, outpacing most other dosage forms.

Mylan is one of the world's leading generics and specialty pharmaceutical companies and sells its products in approximately 150 countries.

It has a portfolio of more than 1,100 generic pharmaceuticals and several brand medications. It also offers a wide range of antiretroviral therapies, and is one of the largest active pharmaceutical ingredient manufacturers.

The New York Exchange-listed company has a market cap of $11.6 billion and posted net profit of $536 million in 2012 on revenues of $6.1 billion.