Watson-Actavis latest among generic M&As

In what its president and CEO called a “significant milestone,” Watson Pharmaceuticals announced last month that the U.S. Federal Trade Commission and European Commission had approved its acquisition of Swiss generic drug maker Actavis. Watson announced the $5.6 billion acquisition of Actavis in April, a deal that is expected to make Watson the third-largest generic drug maker in the world, after Teva Pharmaceutical Industries and Mylan. As a condition for the FTC’s approval, Watson and Actavis had to divest rights to nearly two dozen generic drugs and regulatory applications, selling most of them to Par Pharmaceutical and Sandoz.


While among the largest deals of its kind ever, the acquisition is just the latest in a plethora of mergers and acquisitions among generic drug companies. In May 2012, Sandoz, the generics arm of Swiss drug maker Novartis, announced that it would buy Melville, N.Y.-based Fougera for $1.5 billion, which would make it the world’s biggest manufacturer of generic dermatology drugs. Sandoz announced last month that the Food and Drug Administration had approved its generic version of Taro’s Topicort (desoximetasone) ointment, a treatment for symptoms of various skin diseases that was the first Fougera dermatology product approved since Sandoz’s acquisition of the company. In July 2012, Par Pharmaceutical — based in Woodcliff Lake, N.J., and the world’s fifth-largest generic drug maker — announced that private investment firm TPG would buy it for $1.9 billion.


In August, IMS Health VP industry relations Doug Long said at the National Association of Chain Drug Stores’ 2012 Pharmacy and Technology Conference in Denver that there would be a “big increase” in mergers and acquisitions among generic drug companies in the future.


The main reason, Long has said, is the gradual commoditization of primary care drugs due to the patent cliff. Such disease states as Alzheimer’s disease, psychotic and mood disorders, ulcers, cardiovascular disease and osteoporosis sit within what Long called the “cone of commoditization,” meaning that they are now or soon will be dominated by generics, making it less profitable for brand-name drug makers to develop new drugs for them. The dwindling number of new and easy-to-replicate primary care drugs with blockbuster sales — best exemplified by Pfizer’s cholesterol drug Lipitor (atorvastatin), which went generic one year ago this month and is now made in generic form by multiple companies — is causing branded companies to move into specialty drugs for such conditions as cancers and chronic viral infections, and will drive much of the M&A among generic companies, while many generic companies will move up the value chain as well into more complex modes of delivery patches and injectables.

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