Forest Laboratories, Inc.
) announced its intention to acquire U.S. based privately-held
Aptalis for $2.9 billion in cash. The acquisition, which is
expected to be immediately accretive, is slated to go through in
the first half of 2014.
What Will Forest Gain?
With this acquisition, Forest Labs will be able to strengthen
its position in the gastrointestinal (GI) market in the U.S. and
Canada and the cystic fibrosis (CF) market in Europe. Aptalis'
products will complement existing products in Forest Labs'
portfolio specifically Linzess in the GI portfolio (U.S.) and
ColoBreathe in the CF franchise in Europe.
Aptalis delivered sales of $688 million in FY13 (ended Sep
2013). The company's top three products in the U.S. - Canasa,
Carafate, and Zenpep - contributed 60% to total sales. Meanwhile,
15% of total sales came from international markets.
Acquisition to be Immediately Accretive
In addition to boosting FY15 revenues by almost $700 million,
the acquisition will also allow Forest Labs to realize pre-tax
cost synergies worth $125 million by FY16. About $75 million of
these synergies are expected to be achieved in FY15. Overall,
this acquisition will be a good strategic and financial fit for
Forest Labs and is expected to boost FY15 earnings by about 78
We are positive on Forest Labs' intention to acquire Aptalis.
The deal looks attractive especially keeping in mind the fact
that Forest Labs' Alzheimer drug, Namenda, will be facing generic
competition from 2015. The acquisition will also give Forest Labs
the opportunity to build its presence in Europe and strengthen
its GI and CF portfolios.
The Aptalis deal is the second accretive agreement to be
announced by Forest Labs over the past few weeks. In early Dec
2013, Forest Labs had signed an agreement with
) for the acquisition of exclusive rights to Saphris in the U.S.
Saphris, approved for the treatment of schizophrenia and acute
bipolar mania in adults, generated sales of $150 million for
Merck during the 12 months ended Sep 2013.
Investors have reacted positively to the Aptalis deal and sent
the share price up almost 18%.
Forest Labs is a Zacks Rank #1 (Strong Buy) stock. Some other
stocks worth considering include
Sucampo Pharmaceuticals, Inc.
WuXi PharmaTech (Cayman) Inc.
). Both are Zacks Rank #1 stocks.
FOREST LABS A (FRX): Free Stock Analysis
MERCK & CO INC (MRK): Free Stock Analysis
SUCAMPO PHARMAC (SCMP): Free Stock Analysis
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