Endo to buy generic drugmaker Qualitest for $1.2 bn

Endo Pharmaceuticals Holdings Inc agreed to buy Qualitest Pharmaceuticals, a privately held generics company, for about USD 1.2 billion as it prepares to fill the expected revenue gap when the patent on its key pain drug expires.
Endo's second acquisition in as many months, Qualitest, owned by private equity firm Apax Partners, will help it cover the fall in revenue from its pain drug Lidoderm that goes off patent in 2015."The valuation is fair especially in the long run as it makes strategic sense, as they have a generic business and will complement the product line," analyst Louise Chen of Collins Stewart said.
Lidoderm, used to treat post-shingles pain, has annual sales of about USD 700 million, Chen said.
Endo shares rose about 12% to a three-year high of USD 34.26 in morning trade on Nasdaq. They have gained about 67% since its deal in May to buy medical device maker HealthTronics Inc.
Endo has been hunting for acquisitions to diversify its portfolio to get away from patented drugs. In August, it agreed to buy Penwest Pharmaceuticals.
Analyst Shibani Malhotra of RBC Capital Markets attributed the jump in shares to the transaction being immediately adding to adjusted earnings per share after close.
Also, the management has been effective in diversifying in the last six-eight months, Malhotra said.
Some of the drug majors have been expanding their generic reach recently. Abbott Laboratories agreed to pay USD 3.72 billion for the branded generics business of Piramal Healthcare in May, while GlaxoSmithKline acquired Argentina's Laboratorios Phoenix for USD 253 million in June.