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Actavis, Inc. (ACT - Analyst Report) recently announced the acquisition of global rights to Palau Pharma’s antifungal candidate, albaconazole which is being developed for the treatment of vulvo-vaginal candidiasis, onychomycosis and other antifungal indications. Albaconazole is currently in phase II development and could reach the U.S. and EU markets in 2017.

Actavis made an initial cash payment to Palau and will make additional payments on the achievement of development based milestones. Other financial details were not available.

We note that Actavis is working on strengthening its branded product portfolio. Earlier this year in May, Actavis had announced its intention to acquire Warner Chilcott . The stock-for-stock transaction, valued at about $8.5 billion, includes the assumption of Warner Chilcott’s net debt of $3.4 billion.

The successful completion of this deal will lead to the creation of a leading global specialty pharmaceutical company with combined annual revenues of about $11 billion. The combined company will hold the third position in the U.S. specialty pharmaceutical market with annual revenues of about $3 billion.

Actavis and Warner Chilcott continue to expect the deal to close in the second half of this year. The two companies will be combined to form a new company domiciled in Ireland where Warner Chilcott is currently incorporated.

We are positive on this deal which makes strategic and financial sense. The deal is expected to be immediately accretive. Moreover, it 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.

Actavis currently carries a Zacks Rank #2 (Buy). Other companies that look equally attractive include Acura Pharmaceuticals, Inc. (ACUR) and Simcere Pharmaceuticals Group . Both are Zacks Rank #2 stocks.

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