Endo's Qualitest unit snags niche generics player for $225M

Endo Health Solutions ($ENDP) is beefing up its generics business. The specialty drugmaker's generics unit, Qualitest, agreed to buy smaller rival Boca Pharmacal for $225 million. It's a move to build up sales ahead of generic competition for Endo's top-selling branded drug, Lidoderm.

In that respect, the deal follows in the footsteps of Big Pharma's diversification moves. Companies such as Novartis ($NVS), Sanofi ($SNY) and GlaxoSmithKline ($GSK) have been building up in generics--and other areas, such as consumer health--to help make up for sales lost to generic rivals.

Those patent-cliff setbacks amounted to several billions of dollars, euros and pounds, but Endo's situation may be more dire. Between Lidoderm and Opana ER, another best-selling product vulnerable to generic competition, Endo has more than 40% of its sales at risk. Lidoderm brought in $947.7 million last year--about 31% of Endo's overall sales--while Opana generated $299 million, or about 10%. In June, amid shareholder calls for a sale, Endo announced it would lay off 15% of its workforce to cope with the Opana losses.

Endo was even more dependent on its leading brands before it bought Qualitest in 2010. So, building up the generics business is a natural follow-up. The company was already planning to invest $100 million into manufacturing to amp up Qualitest capacity and increase efficiency.

And now, it's plowing another $225 million into an acquisition. Like Endo, Boca focuses on niche areas, including controlled substances, semisolid drugs and solutions. Endo CEO Rajiv De Silva called Boca's portfolio and pipeline "an ideal fit" for his company. "The acquisition is aligned with our current generics footprint and will accelerate the growth of Qualitest in 2014," he said in a statement.

- read the Endo release

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