Watson Inks Deal with Natco Pharma - Analyst Blog

Watson Pharmaceuticals Inc. (WPI) recently announced that it entered into a deal with India-based Natco Pharma Ltd. for the development and commercialization of a generic version of Celgene Corp.'s (CELG) Revlimid (lenalidomide) in the United States.

Natco Pharma has filed an Abbreviated New Drug Application (ANDA) with the US Food and Drug Administration (FDA) seeking approval to market its generic version of Revlimid 5 mg, 10 mg, 15 mg and 25 mg. The companies believe that Natco Pharma was the first to file an ANDA for the copy cat version of the above-mentioned strengths of Revlimid. This should allow the companies to enjoy 180-day marketing exclusivity for their generic version.

As per the terms of the deal, Watson Pharma and Natco Pharma will share the profit made on sales of their generic version of Revlimid. Additionally, Watson Pharma is responsible for the ongoing regulatory, legal, and commercial expenses related to Natco's lenalidomide product.

Revlimid is approved for the treatment of patients with multiple myeloma who have received at least one prior therapy and for the treatment of transfusion-dependent anemia due to low- or intermediate-1-risk myelodysplastic syndromes, associated with a deletion 5q cytogenetic abnormality with or without additional cytogenetic abnormalities.

The approval of generic Revlimid would be a major boost as branded product sales exceeded $1.7 billion during the first nine months of fiscal 2010.

Neutral on Watson Pharma

We currently have a Neutral recommendation on Watson Pharma, which is supported by a Zacks #3 Rank (short-term Hold rating). We believe that the company's cost-saving initiative and new product launches, both branded and generic, will help drive growth. We also view the company's acquisition of Arrow Group as a smart strategic move. This acquisition has helped expand Watson Pharma's product portfolio and its footprint in ex-US territories. However, integration risks remain and competition in both the branded and generic market remain fierce. Primary competitors include Mylan Inc. (MYL) and Teva Pharmaceutical Industries Ltd. (TEVA).

 
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