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Watson Pharmaceuticals Inc. recently confirmed that it has filed an abbreviated new drug application (ANDA) with the US Food and Drug Administration (FDA) to market a generic version of Allergan Inc.’s (AGN - Analyst Report) drugs, Lumigan and Latisse.

In response, Allergan has filed a lawsuit against Watson Pharma in the United States District Court for the Eastern District of Texas. Allergan is seeking to prevent the generic company from commercializing generic Lumigan before the patents expire. Allergan, along with Duke University, filed a lawsuit against Watson Pharma in the United States District Court for the Middle District of North Carolina, seeking to prevent Watson Pharma from commercializing its generic version of Latisse prior to patent expiry. Since the lawsuits were filed under the provisions of the Hatch-Waxman Act, the FDA cannot approve Watson Pharma's ANDAs until 30 months from the date Allergan received the notice for the ANDA filings or until the court order, whichever is earlier.

According to IMS Health, US sales of Lumigan and Latisse amounted to $409 million and $80 million, respectively, for the twelve months ended January 31, 2012.

We note that while Lumigan is used for the reduction of elevated intraocular pressure in patients with open angle glaucoma or ocular hypertension, Latisse is indicated to treat hypotrichosis of the eyelashes by increasing their length, thickness and darkness.

Our View

We currently have a Neutral recommendation on Watson Pharma. The stock carries a Zacks #2 Rank (Buy rating) in the short run.

We expect new generic product launches over regular intervals to help drive the company’s Global Generic segment’s sales, which climbed 46% during 2011 to $3.32 billion, driven by the generic launch of Pfizer Inc.’s (PFE - Analyst Report) Lipitor and Johnson & Johnson’s (JNJ - Analyst Report) Concerta.

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