CEPH Cephalon (MM)

Watson Pharmaceuticals Inc. (WPI) recently announced the US launch of an authorized generic version of Cephalon Inc.’s (CEPH) Amrix (15 mg and 30 mg). The drug is currently marketed to help control muscle spasm associated with acute, painful musculoskeletal conditions.

Watson Pharma has an agreement with Anesta (a subsidiary of Cephalon), under which Anesta manufactures and supplies all dosage strengths of the authorized generic of Amrix to Watson Pharma, who in turn markets the product in the US. For the deal, Watson Pharma will receive sales-based payments.

Amrix sales amounted to $109.2 million in 2010.

We note that last week Mylan Inc. (MYL) launched a generic version of Amrix in 15 mg and 30 mg dosage strengths. Mylan has 180 day marketing exclusivity for the generic drug since it was the first company to file an Abbreviated New Drug Application (ANDA) for the generic of Amrix.

Recently, Watson Pharma also announced the US launch of an authorized generic version of Johnson & Johnson’s (JNJ) Concerta. Johnson & Johnson markets Concerta as a treatment for attention deficit hyperactivity disorder (ADHD) in children aged 6 to 17 and adults aged 18 to 65.

The company has an agreement with Johnson & Johnson, under which the latter manufactures and supplies all dosage strengths of the authorized generic product to Watson Pharma, who distributes the product in the US.

As per the terms of the agreement, which runs through 2014, Johnson & Johnson is set to receive a share of the net sales of the product from Watson Pharma.

The agreement allows Watson Pharma to file an ANDA with the US Food and Drug Administration (FDA) in order to launch its own generic version of Concerta, post the conclusion of the current agreement.

Concerta sales came in at $1.32 billion in 2010.

Neutral on Watson Pharma

We currently have a Neutral recommendation on Watson Pharma. We believe that the company’s cost saving initiative and new product launches, both branded and generic, will help drive long-term growth.

 
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