Watson, Express Scripts in Huge Pharmaceutical Deals

Watson, Express Scripts in Huge Pharmaceutical Deals

In one of the largest deals of the year, the Federal Trade Commission approved the acquisition of Medco Health Solutions Inc. (NYSE:MHS) by Express Scripts following an 8 month inquiry in to whether the deal was healthy for the industry. This is because by merging, these two firms have created one of the largest pharmacy benefits firm in the US.

The deal had been created in July after  Express Scripts Holding Co (NASDAQ:ESRX)  offered 0.82 of an Express Scripts Holding Co  share for each Medco share, and also offered $28.80 a share in cash. The shareholders of both companies had Okayed the deal, and it was only the inquiry that had held back the mega merger. The FTC said in a statement that the acquisition of Medco by Express Scripts will not harm the dynamics of the industry since the two companies are different and that creation of monopsony power would not happen.

Shares of the two firms had jumped after it was found that early this week, the deal will have been completed by the end of the week. The reason for this jump is that the acquisition of Medco by Express Scripts would have seen the creation of a $29.1 billion benefit firm. Shares of Medco jumped to $71.20, by 3%, while those of Express Scripts jumped to $53.89, by around 68 cents.

In another mega deal, Watson Pharmaceuticals, Inc. (NYSE:WPI), a major player in the drug industry announced that it was buying Actavis for $5.9 billion. This single move made Watson Pharmaceuticals, the third largest generic drug maker in the world. In fact, by this merger, Watson was able to bypass Mylan Pharmaceutical, and now it follows Novartis and Teva Pharmaceutical in terms of size.  The deal, when it was first announced, made shares for Watson jump 7.3% to $74.75 in early premarketing trading.

The move was considered by analysts as one that would help Watson increase its presence in the US market as well as the international market. In fact, when the deal was first announced, shares jumped 9%, and when a detailed a report of the merger was made public, the shares jumped a further 19%. Therefore, it seems that shareholders and the public seem to be giving tacit approval to the deal.

However, there are financial experts who are of the opinion that in the new merger, shares would get close to the $80 benchmark. But not all analysts are of this opinion with some arguing that Watson would not gain much in terms of added sales or revenue; and share estimates of the merger will be around $69.

Nevertheless, the truth of matter is that both the Watson deal, and Express Scripts acquisition are huge. This is because now as it stands, Watson is set to be the third largest generic Pharmaceutical firm in the world, with its share price predicted to reach a mind boggling $85. While Express Scripts acquisition of Medco Health is set to see a new precedent in the provision of health benefits for clients since currently, Express Scripts is the largest pharmacy benefits manager, and it will be handling the prescriptions of around one in every three Americans. 

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