Watson Pharmaceuticals has agreed to acquire Andrx Corp. for approximately $1.9 billion in cash. Watson claims the acquisition will make it the third largest generic pharmaceutical company in the U.S., on the basis of prescriptions dispensed.
According to Watson, the combined companies will have more than 60 drug applications in review at FDA and 2007 revenues of $2.8 billion. A Watson spokeswoman adds that the deal will give the company access to new technologies such as sustained-release drug delivery.
Watson CEO Allen Chao says the acquisition will strengthen his company's portfolio and pipeline in high-value specialty generics. "The combined revenue stream will fuel further product development and sales while allowing Watson the flexibility and financial resources to continue building its brand and generics businesses," he says.
Under the agreement, Anda, an Andrx business that distributes other manufacturers' generic drugs, will operate as a separately managed independent division.
The deal will mark the third major merger in generic pharmaceuticals, a market that is viewed as primed for further consolidation. Last February, Sandoz, the generics division of Novartis, acquired sister companies Hexal and Eon Labs for $8.3 billion. And Teva Pharmaceutical Industries' agreement last July to acquire Ivax Corp. for $7.4 billion created what Teva calls the world's largest generic drugmaker.
Stock analysts say Watson and Andrx have been struggling to grow in the competitive commodity end of the drug business. "The deal itself should come as no surprise," says a report issued by Lehman Brothers last week. "Andrx has been working on such an exit strategy for some time now." Another report, by WR Hambrecht, "applauds" the deal and predicts other mergers among generics producers will likely follow.