Watson Pharmaceuticals Inc. (WPI) recently announced that it has acquired Greece-based generic company, Specifar Pharmaceuticals SA, for €400 million ($562 million) in cash. The company also assumed $17.5 million of Specifar Pharma’s debt.
Specifar Pharma’s former owners are also entitled to receive up to €40 million annually for the first five years on future sales of the generic version of AstraZeneca’s (AZN) gastroesophageal reflux disease drug, Nexium (esomeprazole).
The generic version of Nexium is expected to debut in the European markets in the fourth quarter of 2011. Specifar Pharma’s could potentially be the first generic of Nexium to hit the market.
Watson Pharma expects this acquisition to be modestly accretive to 2011 earnings and substantially accretive to 2012 earnings.
Specifar Pharma, which operates mainly in Europe, develops products for third parties. It is also engaged in manufacture, development and marketing of generic products. The company’s development business accounts for more than 70% of its total revenue.
Currently, Specifar Pharma has about 400 marketing authorizations licensed to third parties for sale in 36 countries, along with eight products currently filed in the European Union (EU) and additional products in development.
Specifar Pharma’s generic portfolio has more than 30 products, inclusive of internally developed and in-licensed products. The company also markets products in Greece under the brand name Alet Pharmaceuticals.
Neutral on Watson Pharma
We currently have a Zacks #2 Rank (short-term Buy rating) on Watson Pharma. We believe that this acquisition will help the company to enhance its commercial presence in key European markets and strengthen its foothold in the €6 billion Greek pharmaceutical market, which presently has generic utilization rate of 17%, one of the lowest in the EU.
Longer-term, we have a Neutral recommendation on Watson Pharma.
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