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Sep 28, 2010

Endo to Buy Qualitest for $1.2B to Bolster Generics Business and Pain Portfolio

Endo to Buy Qualitest for $1.2B to Bolster Generics Business and Pain Portfolio

Acquired firm will add $400M to annualized revenues. [© frenta -]

  • Endo Pharmaceuticals will scoop up generics firm Qualitest Pharmaceuticals for $1.2 billion in cash. The acquired company is expected to add about $400 million to Endo’s annualized revenues, and the latter says it also expects to achieve growth in revenues of the combined generics business of at least 15% over the next two years. On a proforma basis the combined entity would have revenues of some $2 billion in fiscal 2010, and an employee base of over 3,000. Target annualized synergies of about $30 million are projected by 2013.

    Endo is financing the acquisition of Qualitest using $500 million from its existing cash reserves, plus a $300 million draw down from an existing revolving credit facility, and another $400 million in already secured financing. Earlier in September the firm announced the successful completion of a tender offer by its indirect wholly owned subsidiary, West Acquisition, for all of the outstanding shares of common stock of Penwest Pharmaceuticals. Endo will acquire any Penwest shares that were not purchased in the tender offer in a second-step merger which is expected to be completed in the fourth quarter of 2010.

    The firm claims Qualitest is the sixth largest generics firm in the U.S. in terms of prescriptions filled. Acquisition of the company will add significant critical mass to Endo’s current generics business, as well as provide the combined entity with a greater diversity of products and in particular an enhanced portfolio of pain-management products. 40% of Qualitest’s revenues are derived from its pain products, and the U.S. pain market is now valued at some $15 billion. Over 90% of all prescriptions for pain medications are now filled by generics, Endo adds.

    “The acquisition of Qualitest accelerates our stated strategy of building a diversified healthcare company, better able to respond to the changing economics that drive the U.S. healthcare environment,” comments David Holveck, Endo president and CEO. “We believe that this transaction will accelerate and diversify our revenues and earnings streams, while also providing our partners in the industry with a wider range of products and services at multiple value points.”

    Qualitest's generics portfolio encompasses 175 product families, and two-thirds of its products are listed among the top 250 generics by total prescription volume, Endo states. The firm says the combined company will have a broad-ranging pipeline of ANDAs, with 46 active ANDAs under FDA review in therapeutic areas spanning pain, urology, CNS, oncology, and hypertension. Another 24 ANDAs are in development in multiple therapeutic areas. Qualitest operates cGMP facilities in the U.S., for the production of controlled substances and liquids.

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