Watson Pharmaceuticals to buy private generic drug maker Arrow Group for $1.75B in cash, stock

Watson Pharma to buy Arrow group for $1.75B

NEW YORK — Watson Pharmaceuticals Inc. said Wednesday it will buy smaller generic drug maker Arrow Group for $1.75 billion in cash and stock.

Watson of Morristown, N.J., said it is getting a promising drug candidate pipeline and access to new markets in the deal. It said the combined company will have about $3 billion in annual revenue and do business in more than 20 countries. Watson expects the transaction to close later this year, pending review by regulators, and add to its profit in 2010.

It said privately held Arrow is one of the fastest growing generic drug companies, with $647 million in sales in 2008. Arrow owns the U.S. rights to the authorized generic version of Pfizer Inc.’s cholesterol drug Lipitor, which is the best-selling brand-name drug in the world. The generic is expected to reach the market in November 2011.

Watson reported $2.54 billion in revenue last year, and expects about $2.65 billion this year. The world’s largest generic drugmaker, Teva Pharmaceutical Industries Ltd., reported $11.09 billion in revenue in 2008.

The deal includes $1.05 billion in cash and $500 million in stock, or 16.9 million shares worth roughly $29.51 each, along with $200 million in preferred stock. The boards of both companies approved the deal. Arrow shareholders may receive additional payments based on sales of generic Lipitor.

Arrow has about 1,000 employees, including about 250 working in research and development. The company does business as Arrow Generics in the U.K., Cobalt Pharmaceuticals in the U.S. and Canada, and Arrow Generiques in France. It owns production facilities in Brazil, Canada, and Malta, and has a research and development facility in Australia.