Teva Pharmaceutical Industries, the world's biggest generic drug maker, will receive a conditional green light from US regulators to its $6.8 billion acquisition of rival Cephalon.
The Federal Trade Commission said Friday it would allow the deal, which it had feared could reduce competition in the multi-billion-dollar market, if Teva sells the rights to two generic drugs ahead of the company's October 14 target date for the transaction.
The generic treatments -- a cancer pain compound and a muscle relaxant -- have US combined sales of around $300 million per year.
Israel-based Teva first announced in May its intent to acquire Pennsylvania-based Cephalon for $6.8 billion, including debt, overtaking a rival bid from from Canada's Valeant.
The FTC had stated in a complaint that market competition would be reduced and prices raised due to the acquisition.
The US agency said it will require Teva to sell its rights to its transmucosal fentanyl citrate lozenges used to treat cancer pain. Cephalon already has a branded version of the drug, called Actiq.
Three generic versions exist, but two of them are owned by Cephalon and Teva, meaning a merger would result in the firm having an 80 percent share of the generic product.
It also said the company would need to sell off its extended release version of a muscle relaxant. Cephalon has a branded version called Amrix, and Teva and Cephalon are among just a handful of suppliers that can quickly produce the drug. Their merger would result in less competition in the future.
"This settlement preserves competitive markets for current generic drugs, which are key to holding down the cost of health care for consumers," FTC Bureau of Competiton chief Richard Feinstein said in a statement.
The FTC also said the proposed settlement would require Teva to provide the rights to outside companies to market a generic version of Cephalon's wakefulness drug Provigil in 2012.
Provigil, whose sales topped $1 billion in 2010, is used to treat excessive sleepiness caused by narcolepsy or shift work disorders. No generic versions of the drug currently exist.