Endo Eyes Generics Growth With $225M Boca Pharmacal Acquisition

Endo Health Solutions said today that its Qualitest generic drugs subsidiary is acquiring specialty generics company Boca Pharmacal for $225 million cash. Endo said the deal is expected to enhance Qualitest's growth platform and pipeline-;one of Endo's priorities for its ongoing restructuring-;and was consistent with Endo's strategic transformation into a more focused specialty healthcare company.

The acquisition is expected to close before year's end subject to standard regulatory requirements. Endo said it will finance the Boca Pharmacal acquisition with cash on hand. The company reported $505.6 million in cash and cash equivalents as of June 30, according to its second-quarter Form 10-Q filing with the U.S. Securities and Exchange Commission.

Established in 1998, Boca Pharmacal is based in Coral Springs, FL, and focuses on commercializing and developing products in categories that include controlled substances, semisolids, and solutions. The company's product list includes generic versions of anxiety drug Xanax (alprazolam) and the antiepileptic Keppra (levetiracetam). And in July, Qualitiest won FDA approval for Oxycodone and Acetaminophen tablets of 2.5 mg/325 mg, 7.5 mg/325 mg, and 10 mg/325 mg.

During the first half of 2013, Qualitest net sales grew 14% year-over-year, to $349 million. Growing Qualitest, a generic business of more than 600 products, is one of three priorities to which Endo has committed itself under a restructuring announced in June, in part through accretive acquisitions.

"The acquisition of Boca Pharmacal is the first of several transactions we plan to execute as we transform Endo into a more focused specialty healthcare company with a lean operating model, able to deliver consistent earnings and revenue growth for our shareholders," Rajiv De Silva, Endo's president and CEO, said in a statement. "The acquisition is aligned with our current generics footprint and will meaningfully accelerate the growth of Qualitest in 2014. I believe that the revenue and earnings contribution of this transaction, combined with the unique commercial portfolio and strong pipeline of ANDAs, make this an ideal fit."

Endo said Boca Pharmacal is expected to generate about $50 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) this year, and be immediately accretive to Endo's 2013 adjusted diluted earnings per share.

Endo lowered its projected adjusted diluted EPS range in June to between $4.10 and $4.40, from between $4.40 and $4.70 as part of its restructuring, which included eliminating 15% of its workforce or some 700 jobs worldwide, as well as pursuing buyers for its HealthTronics urological business and branded pharmaceutical early-stage discovery platform.

The restructuring actions came less than a month after FDA rejected Endo's citizen-petition aimed at stopping a generic version of its Opana ER® (oxymorphone HCl) moderate-to-severe pain drug from reaching the market, and sent the company a complete response letter that delayed its third try at approval for its long-acting testosterone undecanoate injection Aveed.

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