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Watson to acquire Arrow to double generics business Posted 31/08/2009

Watson Pharmaceuticals announced it has entered into a definitive agreement to acquire privately held Arrow Group for US$1.75 billion (Euros 1.25 billion) in cash and stock. The combination of Watson and Arrow will result in a global pharmaceutical company with over US$3 billion (Euros 2.15 billion) in revenue, commercial operations in over 20 countries, and a robust product portfolio and pipeline. Watson expects the transaction to close in the second half of 2009, and be accretive to cash earnings per share in 2010 before synergies.

Arrow is one of the fastest growing generic pharmaceutical companies in the world, generating US$647 million (Euros 464 million) in revenues in 2008, representing a 67% organic compound annual growth rate since 2001. Arrow markets more than 100 molecules in over 20 different countries, including key markets such as Canada, France and the UK. In addition, Arrow has an extensive pipeline that will be launched across multiple markets, including significant potential US launches in each of the next three years. Arrow has approximately 1,000 employees worldwide, including more than 250 in R&D.

Arrow’s global commercial footprint in many established and emerging countries allows Watson to introduce its generic and brand products into these markets. Arrow's manufacturing network will further expand Watson's global supply chain. Additionally, Arrow owns an extensive portfolio of product registrations in regions where it does not yet have a commercial presence. This will allow Watson to rapidly and efficiently expand its sales and marketing operations into these markets. Since 2000, Arrow has launched an extensive portfolio of products into more than 20 countries. This includes more than 50 molecules developed internally. In addition, Arrow expects approval of 40 new molecules over the next three years. Successful patent challenges and settlements will allow for significant US generic product launches over the next three years, including exclusive US rights to launch the authorised generic version of Lipitor (atorvastatin) in November 2011.

Arrow owns approximately 36% of Eden Biodesign, a biopharmaceutical company that provides development and manufacturing services to early stage biotechnology companies. Watson believes Eden will provide the operational expertise and manufacturing capability to support its long-term investment in generic biologicals. Arrow’s global footprint and product portfolio has minimal overlap with Watson's and the Company anticipates that the integration of the two businesses will be very manageable. Arrow brings a global sales, legal and regulatory infrastructure to complement Watson's expertise in clinical, regulatory and legal matters. The combined management team has significant experience in executing international transactions as well as managing sales, marketing, production, R&D and regulatory functions on a global basis. Watson will continue to have flexibility to be opportunistic in business development initiatives for both its generic and brand businesses.

Source: Pipeline Review, Scrip, Wall Street Journal, Watson

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