Endo's Latest Acquisition Builds Out Pain Franchise, Generics Lineup

| About: Endo International (ENDP)

By Michael Fitzhugh

Endo Pharmaceuticals (NASDAQ:ENDP) is buying the privately-held generic pain medications giant Qualitest from Apax Partners for about $1.2 billion. If approved by regulators, the deal would broadly expand the number of Endo's generic medicines under active FDA review and would bolster its portfolio of generic pain management drugs, giving it deeper access to the $15 billion U.S. pain medication market.

Qualitest's CEO Marvin Samson called the combination “an excellent fit.” More than 90 percent of pain medication prescriptions are filled by generics in the United States and Qualitest is the country's sixth largest generics company by prescriptions filled. Controlled substances, such as pain reliever oxycodone, make up 40 percent of Qualitest's product portfolio.

David Holveck, Endo’s president and CEO, says the transaction accelerates its progress on “building a diversified healthcare company, better able to respond to the changing economics that drive the U.S. healthcare environment.”

Apax Partners, a global private equity firm, has invested more than $3.4 billion (€2.5 billion) in the healthcare sector during the past five years, it says.

Plans for post-acquisition leadership include an integration team comprised of Samson, Qualitest COO Julie McHugh, and senior leaders from both organizations. Endo intends to retain Qualitest’s Charlotte, North Carolina and Huntsville, Alabama facilities. It will also maintain its own facility in Westbury, New York. Endo is headquartered in Chadds Ford, Pennsylvania.

The acquisition is Endo’s second big buy this year. In August, Endo launched a $168 million bid to buy its partner Penwest Pharmaceutical, a purchase intended to cut Endo’s royalty expenses and expand its rare disease portfolio.

By adding Qualitest’s portfolio to its own, Endo will have a lineup of 46 abbreviated new drug applications under active FDA review in multiple therapeutic areas, including pain, urology, central nervous system diseases, oncology, and hypertension. It will also have another 24 abbreviated new drug applications under development.

The transaction is subject to regulatory review, including clearance by antitrust authorities and is expected to close late in the fourth quarter of 2010 or early in the first quarter of 2011.

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