Actavis, Inc. (ACT) is now a step closer to completing its acquisition of Warner Chilcott plc (WCRX) with the U.S. Federal Trade Commission (FTC) voting in favor of the acquisition. Actavis will, however, have to divest certain products.
The products that Actavis has agreed to divest include Zenchent Fe, Actavis’ generic version of Femcon Fe, pending applications for the company’s generic versions of Lo Loestrin Fe and Atelvia, and an approved application for Actavis’ generic version of Loestrin 24 Fe. Actavis has a settlement agreement for its generic version of Loestrin 24 Fe under which the product may be launched in Jan 2014. All these products will be divested to Amneal Pharmaceuticals.
The deal, which has received shareholder’s approval, should close shortly once approval from the Irish High Court is obtained and other customary closing conditions are fulfilled.
Actavis currently holds a Zacks Rank #2 (Buy). We are positive on the upcoming Warner Chilcott acquisition which makes strategic and financial sense. The Warner Chilcott acquisition will help strengthen Actavis’ position in the women’s health (eight products) and urology (six marketed products) segments. The company will also gain a presence in the gastroenterology and dermatology markets. Additionally, Actavis will gain a pipeline of 25 candidates including 15 targeting the women’s health market.
The acquisition is expected to be immediately accretive. Moreover, the acquisition will provide strong operating cash flow and allow Actavis to de-lever its balance sheet. The tax rate will also be significantly below current levels.
Currently, companies like Mylan (MYL) and Akorn, Inc. (AKRX) also look well-positioned with both being Zacks Rank #2 stocks.
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