Watson Buys Ascent Pharmahealth

Watson Pharmaceuticals Inc. (WPI - Analyst Report) recently announced the acquisition of Australia-based Ascent Pharmahealth Ltd. for AU$375 million (about US$393 million) in cash. Ascent Pharmahealth is the Australian and Southeast Asian generic pharmaceutical wing of Strides Arcolab Ltd. This transaction, which was signed and closed immediately, is expected to be accretive to 2012 non-GAAP earnings.

We note that with this acquisition, Watson Pharma became the fifth largest generic pharmaceutical company in Australia on the basis of revenue. Moreover, the combined company is the second largest in terms of total molecules. Watson Pharma also became the largest generics company in Singapore after taking over Ascent Pharmahealth.

We are very pleased with this development, as Watson Pharma will now gain a foothold in Malaysia, Hong Kong, Vietnam and Thailand market. Moreover, Ascent Pharmahealth has a 14% market share in the dermatology and skin care market of Australia. This will help diversify Watson Pharma’s portfolio.

This is the second major deal entered into by Watson Pharma in the last couple of months. Last month, Watson Pharma and Amgen Inc. (AMGN - Analyst Report) entered into a collaboration agreement for the worldwide development and commercialization of oncology antibody biosimilar medicines.

According to the agreement, Amgen will be responsible for developing, manufacturing and initially commercializing the products. Watson Pharma will contribute $400 million towards the co-development of the biosimilars, which will include the provision of development support, along with sharing product development risks.

Moreover, Watson Pharma will use its significant expertise for the commercialization and marketing of products, together with effectively managing the lifecycle of the biosimilar products.

The products developed under the collaboration will be sold under a joint Amgen/Watson label. Also, as a part of the collaboration, Watson Pharma will initially receive royalties and sales milestones from product revenues. Meanwhile, the terms of the collaboration prohibit the production of any biosimilars of Amgen's proprietary products.

We believe that this deal will help expand Watson Pharma’s biosimilar and generic portfolio, which will help drive the company’s long-term growth.

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