Watson Pharma Inks Deal - Analyst Blog

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Watson Pharmaceuticals, Inc. (WPI) continues to expand and strengthen its footprint in ex-US territories. The company recently inked a deal with Brazilian company, Moksha8, for the manufacture and supply of certain products. 

 

Terms of the Deal

 

Under the terms of the deal, Watson Pharma will provide Moksha8 with specific products that will be marketed, sold, and distributed exclusively by the latter in Brazil and Mexico. The companies will initially start with a dozen products which may be expanded later.

 

Watson Pharma's initial investment of about $30 million in Moksha8 will provide it with a significant minority position in Moksha8. Watson Pharma could increase its equity position further by investing another $20 million. However, the additional investment depends on Moksha8's ability to acquire third-party products in the coming year. Besides Watson Pharma, Moksha8 has partnership agreements with several other companies including Roche (RHHBY), Pfizer (PFE) and BioCryst (BCRX).

 

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Deal Strengthens Presence in Latin America

 

With a 75% share of the $40 billion Latin American market, Brazil and Mexico are the two largest markets in this region. Moksha8 already has a presence in Latin America with about 180 sales reps marketing 21 branded products that focus on central nervous system disorders, infectious disease and pain.

 

This deal should allow Watson Pharma to strengthen its presence in Latin America, especially Mexico. The company already has a presence in the Brazilian generics market through a subsidiary.  

 

Neutral on Watson Pharma

 

We currently have a Neutral recommendation on Watson Pharma, which is supported by a Zacks #3 Rank (short-term “Hold” rating). We believe that Watson Pharma's cost-saving initiative and new product launches, both branded and generic, will help drive growth. We also view the company's acquisition of Arrow as a smart strategic move. This acquisition has helped Watson Pharma expand its footprint in ex-US territories, especially in countries like Australia, New Zealand, Brazil, Scandinavia, Germany, Central and Eastern Europe, Turkey, Japan and South Africa. It has also boosted Watson Pharma's product offerings and pipeline. However, we remain concerned about integration risks and fierce competition in both the branded and generic markets.



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