Watson Launches New Pill - Analyst Blog

Watson Pharmaceuticals, Inc. (WPI) recently announced the launch of its emergency oral contraceptive (OC) pill, ella, that has been approved by the US Food and Drug Administration (FDA) for the prevention of unplanned pregnancies for up to five days after unprotected intercourse. Ella, which has been developed by HRA Pharma, is indicated for emergency use only. Ella will be promoted by Watson Pharma in the US under its exclusive distribution agreement with HRA Pharma.

Focus on Women's Health Portfolio

Watson Pharma has been working on expanding its women's health portfolio over the past few quarters. The company had entered into an exclusive licensing agreement with HRA Pharma in February 2010, under which Watson Pharma will bear all US commercialization and marketing expenses for ella. Watson Pharma is also liable to pay royalties to HRA Pharma on product sales in the US.

In addition to its agreement with HRA Pharma, Watson Pharma acquired exclusive US rights to Columbia Laboratories' bioadhesive progesterone gel product line, Crinone and Prochieve, which are approved for infertility and secondary amenorrhea. The companies are also developing the product line for the prevention of pre-term birth in women with a short cervix. Positive results from an ongoing study for this indication, due later this year, should allow the companies to gain approval in mid to late 2011.

Watson Pharma signed another agreement in July 2010 for the development and commercialization of a recombinant follicle stimulating hormone (rFSH). The biosimilar molecule is currently in preclinical development for the treatment of female infertility.

Ella Provides an Edge over Existing Emergency Pills

Although ella will be available by prescription only, Watson Pharma should benefit from the launch of ella due to its unique efficacy profile. Watson Pharma already has a presence in the emergency contraceptive market thanks to NextChoice. However, we believe ella will have an edge over existing emergency contraceptive pills which need to be taken within 72 hours of unprotected intercourse.

It is estimated that almost half of the 6.4 million pregnancies in the US in 2001 were unintended and occurred due to the failure of other birth control methods. The availability of ella will provide women with an alternative therapeutic option so as to prevent unplanned pregnancies. Ella is already available in Europe under the brand name ellaOne.

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 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 (TEVA).

 
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