Generic Launches at Watson Pharma

Watson Pharmaceuticals, Inc. ( ) recently announced that it has gained US Food and Drug Administration (FDA) approval for its generic version of Allergan’s ( AGN - Analyst Report ) Sanctura XR. The company intends to launch the product immediately.

Sanctura XR, which is approved for the treatment of overactive bladder (OAB) with symptoms of urge urinary incontinence, urgency and urinary frequency, posted sales of about $67 million in the 12 months ending July 31, 2012. The sales data is from IMS Health.

Watson Pharma gained FDA approval for its generic version of Sanofi’s ( SNY - Analyst Report ) hypertension drug, Avapro (75 mg, 150 mg and 300 mg), as well. Avapro is also approved for the treatment of diabetic nephropathy with an elevated serum creatinine and proteinuria (>300 mg/day) in patients with type II diabetes and hypertension.

The company intends to launch the product immediately. According to IMS Health, Avapro branded and generic sales during the 12 months ended August 31, 2012 were $390 million. Generic versions of Avapro have already been launched by companies like Mylan ( MYL - Analyst Report ) and Teva Pharma ( TEVA - Analyst Report ) .

Meanwhile, Watson Pharma remains on track to complete its acquisition of Actavis later this month or early next month. The company, which gained European Commission (EC) for its proposed acquisition of Actavis earlier this month, gained a positive vote from the Federal Trade Commission (FTC) recently.

Watson Pharma will be required to sell certain products in order to gain FTC approval. These products will be sold to Par Pharmaceuticals, Inc. and Novartis’ ( NVS - Snapshot Report ) generic division, Sandoz.

We view the upcoming acquisition of Actavis as a smart strategic move by Watson Pharma. This deal, which is expected to be immediately accretive, should help the company strengthen its presence in the ex-US generics market and expand and strengthen its presence and product portfolio. The acquisition will more than double the company’s commercial position in key European markets as well as emerging markets, including Central and Eastern Europe and Russia.

We note that this acquisition will make Watson Pharma the third largest global generics company. We currently have a Neutral recommendation on Watson Pharma.