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May 20, 2013

Actavis Acquiring Warner Chilcott for $8.5B

  • Actavis has agreed to acquire Warner Chilcott for about $8.5 billion, in a deal that expands the generic drug giant into the nation’s third-largest specialty pharmaceutical company with women's health, gastroenterology, urology, and dermatology among its core therapeutic areas, the companies said today.

    The combined company is expected to be called Actavis or a variant such as New Actavis, and be led by the current leadership of today’s Actavis. The new entity would generate about $11 billion in annual revenue, with specialty brand sales comprising some 25% of total combined company 2013 revenues, compared to roughly 7% for standalone Actavis. Just last year, Actavis itself was acquired for about $5.7 billion by Watson Pharmaceuticals, which then took the name of its acquisition.

    The latest deal is expected to close by year’s end, at which point Warner Chilcott shareholders are expected to own about 23% of the combined company.

    "The combination will enhance the value of each company's portfolio and provides a substantial foundation to support the successful launch of new products over the next several years, particularly in women's health," Paul Bisaro, Actavis’ president and CEO, said in a statement. 

    Bisaro cited as examples of planned new products over the next several years Minastrin 24 Fe, an oral contraceptive for which Warner Chilcott won FDA approval on April 22 before saying a launch was unlikely this year; a progestin-only contraceptive patch; Esmya, a first-in-class oral drug for pre-operative treatment of symptomatic uterine fibroids, now approved only by the European Union while a Phase III clinical trial in the U.S. was recruiting patients as of April 29; metronidazole vaginal gel 1.5%; and other women's health products in development, which Actavis inherited through its recent acquisition of Uteron Pharma.

    Altogether, the combined company’s portfolio would include more than 25 products in various stages of development, 15 of them in women's health, as well as:

    • Eight women's health products already on the market including contraceptives, infertility treatments, and hormone therapy products;
    • Six marketed urology products for overactive bladder, testosterone replacement, prostate cancer, and benign prostatic hyperplasia;
    • Two marketed gastroenterology products, both for ulcerative colitis;
    • And one marketed dermatology product, plus an expected commercial launch of a newly approved product in July 2013.

    "The combination of Actavis and Warner Chilcott creates a strong specialty brand portfolio focused in therapeutic categories with strong growth potential, and is supported by a deep pipeline of development programs," Bisaro said in the statement. "The combination is commercially and financially compelling, and reshapes the specialty pharmaceutical universe by creating a powerful global competitor. It creates a company with an exceptionally strong balance sheet, coupled with a favorable tax structure to support future growth."

    The replenished pipeline is especially welcome news for Warner Chilcott, which has seen its revenues decline for more than a year after its osteoporosis treatment Actonel lost exclusivity in Europe and faces stepped-up competition from generics in the U.S. Actonel revenue fell about 33% last year, to $519 million, and another 24% during the first quarter, to $111 million.

    Warner Chilcott shareholders will receive, for each share they now own, 0.160 shares in the combined company. Based on Actavis' closing price of $125.50 on May 17, that equals $20.08 per Warner Chilcott share—43% above the company’s average $14 per-share price for the 30 trading days ending May 9, the day before Warner Chilcott disclosed preliminary talks with Actavis; and 34% above Warner Chilcott’s closing May 9 price of $15.01.


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