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Actavis (ACT - Analyst Report) and Valeant Pharmaceuticals International, Inc. (VRX - Snapshot Report) announced that the U.S. Food and Drug Administration (FDA) has cleared their antibiotic for the treatment of bacterial vaginosis (BV), metronidazole 1.3% vaginal gel. Actavis expects to launch the product later this year.

Last year, Actavis had entered into an agreement with Valeant to acquire worldwide rights to metronidazole 1.3% vaginal gel for the treatment of BV. As per the terms of the agreement, Actavis agreed to acquire the drug on FDA approval.

In exchange, Valeant will receive up to $57.0 million comprising an upfront payment of $1.0 million and certain milestone payments up to $11.0 million. It also includes guaranteed royalties for the first three years of commercialization of metronidazole 1.3%. Actavis will continue to pay royalties to Valeant after the first three years of commercialization as well.

Metronidazole 1.3% provides a convenient single-dose alternative to currently available metronidazole vaginal gel 0.75% for patients with BV. According to the Centers for Disease Control and Prevention, BV is the most common vaginal infection in women between 15 to 44 years. As per IMS Health, the U.S. BV market is estimated to be worth approximately $140 million annually.

Approval of metronidazole 1.3% boosts Actavis’ branded product portfolio. The company has been working on strengthening this portfolio for sometime now. Last month, Actavis announced its intention to acquire Forest Laboratories Inc. . The acquisition will lead to the creation of a specialty company with sales of more than $15 billion per year, a well-diversified suite of products and a presence in varied geographical areas.

The Forest Labs acquisition will push up Actavis’ branded products revenues to 50% of total combined revenues from the current level of 30% of the standalone company’s revenues. The Forest Labs acquisition will also bring about significant synergies and boost earnings and revenues.

Actavis carries a Zacks Rank #2 (Buy). Other well-ranked stocks in the health care sector include Dr. Reddy's Laboratories Ltd. (RDY - Analyst Report), a Zacks Rank #1 stock.

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