The companies still must obtain antitrust approval from the European Commission but said they expect the EC to act in time for them to close the transaction by Oct. 14.

The FTC's order requires Israel-based Teva to sell the rights and assets related to a generic cancer pain drug and a generic muscle relaxant. The settlement also requires Teva to enter into a supply agreement that will allow a competing firm to sell a generic version of Cephalon's wakefulness drug Provigil in 2012. Teva and Cephalon announced their plan to merge in May and their merger agreement anticipated that the FTC might force the sale of Provigil.

The rights to all the drugs covered in the FTC order are being acquired by Par Pharmaceutical of Woodcliff Lake, N.J.

Teva was represented in the transaction by Kirkland & Ellis LLP corporate partners David Fox and Jeffrey Symons, with Tim Muris, Christine Wilson and Ian Conner handling the antitrust issues.

"This settlement preserves competitive markets for current generic drugs, which are key to holding down the cost of health care for consumers. It also ensures there will be competition among generic drugs introduced in the future," said Richard Feinstein, director of the FTC's Bureau of Competition.

According to the FTC, without the conditions the merger would harm competition among treatments for cancer pain, muscle relaxants and treatments for narcolepsy, shift-work sleep disorder and daytime sleepiness associated with sleep apnea.

The Deal reported in August that the FTC would likely require the divestiture of the generic version of Actiq, Cephalon's branded transmucosal fentanyl citrate lozenges used to treat cancer pain. Three generic versions of the drug are sold in the U.S. by Teva, a partnership of Cephalon and Watson Pharmaceuticals Inc., and Covidien plc. The takeover of Cephalon would have given Teva more than 80% of sales of Actiq and its generic competitors.

The FTC is also requiring the sale of the rights to a generic version of Amrix, Cephalon's branded muscle relaxant. Amrix is an extended release form of cyclobenzaprine hydrochloride. While no companies currently make or market a generic version of Amrix, the FTC said Teva and Cephalon are two of only a limited number of suppliers that may be able to enter the market quickly with a generic product.

Non-exclusive U.S. rights to market a generic version of Provigil are being sold to Par as well. No companies currently market a generic version of Provigil but Teva, Ranbaxy Pharmaceuticals, Inc., and Mylan Pharmaceutical Inc. have taken steps toward entering the market, and all are eligible to seek a 180-day marketing exclusivity provided under a federal law that encourages generic firms to enter the market for individual drugs.

However, each company also has signed an agreement with Cephalon to refrain from marketing generic Provigil until April 2012.

To ensure that competition exists while the "pay-for-delay" agreements are in place, the FTC is requiring Teva to enter into a supply agreement to provide Par with generic modafinil tablets in the United States for one year. In addition, Par may extend the modafinil supply agreement for another year.

The FTC stressed that the merger settlement does not resolve the FTC's ongoing litigation against Cephalon over Provigil pay-for-delay settlements and that litigation continues.