Watson Pharmaceuticals, Inc.
) recently received a favorable vote from the Federal Trade
Commission (FTC) for its proposed acquisition of the Actavis
group of companies. However, Watson Pharma will be required to
sell certain products.
These products will be sold to Par Pharmaceuticals, Inc. and
) generic division, Sandoz. Currently marketed products that will
be sold to Par Pharma include Actavis' generic versions of
Johnson & Johnson's
) fentanyl transdermal film (chronic pain), Ani Pharmaceuticals,
Inc.'s Reglan (nausea), Kadian (acute pain), and
) Adalat CC (hypertension and angina) among others.
Moreover, Par Pharma will acquire Watson's pending
applications for its generic versions of several products
) Adderall XR (attention deficit hyperactivity disorder) and
) Opana ER (chronic pain), among others.
Sandoz will acquire Actavis' generic versions of drugs
including Ativan (anxiety disorders) and
) Zyban 150 mg (to help quit smoking).
All total, Watson Pharma and Actavis will be selling the
rights and assets to 18 drugs and the manufacturing rights to
EC Approval Already Gained
The FTC vote comes a few days after Watson Pharma received the
green signal from the European Commission (EC) for its proposed
acquisition of Actavis. The EC said that although the acquisition
will lead to major changes in the competitive scenario, the
combined entity will, nevertheless, continue facing strong
The EC focused on the impact of the acquisition on the markets
for drugs like anti-depressants and anti-hypertensives,
especially in Denmark, Sweden and the UK.
Acquisition a Smart Strategic Move
Watson Pharma had first announced its intention to acquire
Actavis in April 2012 for an upfront payment of €4.25 billion.
Actavis stakeholders could also receive an additional
consideration depending on the achievement of certain 2012
performance targets. The achievement of these targets would
result in the delivery of up to 5.5 million shares of Watson
Pharma in 2013. Actavis has a presence in more than 40 countries.
The acquisition is slated to close later this month/early next
We view the upcoming acquisition of Actavis as a smart
strategic move by Watson Pharma. This deal, which is expected to
be immediately accretive, should help the company strengthen its
presence in the ex-US generics market and expand and strengthen
its presence and product portfolio. The acquisition will more
than double the company's commercial position in key European
markets as well as emerging markets, including Central and
Eastern Europe and Russia.
We note that this acquisition will make Watson Pharma the
third largest global generics company. Other players in the
generics market include
Dr. Reddy's Laboratories
). We currently have a Neutral recommendation on Watson Pharma,
which carries a Zacks #2 Rank (short-term 'Buy' rating).
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