The European Commission's Antitrust unit cleared Friday the acquisition of US-based pharmaceutical company Cephalon Inc. (CEPH) by the generic pharmaceutical company Teva Pharmaceuticals Industries Ltd (TEVA.TV) of Israel but set conditions on its approval.

In a statement, the commission said the decision is conditional on the divestment of Cephalon's generic version of the Provigil drug, which is used to treat excessive daytime sleepiness. The commission said Teva also has a generic version of the drug.

The commission said it was concerned about the effect of Teva's purchase of Cephalon on competition for drugs based on Modafinil, which is the main pharmaceutical ingredient of Provigil as well as the Teva generic drug and a new drug that Cephalon has in the pipeline.

"The Commission's investigation showed that the divestment of Cephalon's generic pipeline Modafinil product, as offered by the company, will allow a competitor to emerge and compete effectively with the merged entity."

Teva is the world's largest generic pharmaceutical company. Cephalon also supplies generic drugs in the EU.

-By Laurence Norman, Dow Jones Newswires; 32-(0)2 741 1481; laurence.norman@dowjones.com

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