Thursday, September 5, 2013

Endo acquires Specialty Generics Company Boca Pharmacal

Endo announced the acquisition of Boca Pharmacal, a specialty generics company that focuses on commercializing and developing products that include tablets and capsules, semisolids, solutions and suspensions. Endo will pay $225m in cash for Boca. 

Transaction Valuation

Endo is acquiring Boca Pharmacal for $225M in cash and the transaction is expected to be accretive
to 2013 EPS.  The transaction values Boca at 1.9 times sales and 3.5 times EBITDA. 
Boca Pharmacal is a specialty generics company that develops and commercializes a variety of niche pharmaceutical products, including controlled substances, semisolids and solutions. On a stand-alone basis, Boca is expected to generate $50MM in EBITDA during 2013. According to IMS, Boca’s
2013 sales are annualizing at ~$120MM in 2013.

Transaction Rationale - Accretive in the short term, but long term prospects questioable!

A major part of of 1H13 sales of Boca are from generic hydrocodone/APAP tablets. The sales have surged as the USFDA’s guidelines recommed  phasing out combination products containing acetaminophen above 325 mg.  Boca’s HYCD/APAP tablets fall below this threshold at 300 mg. The USFDA expects to complete the phase out higher-strength acetaminophen products by 2014.

Currently Boca is the sole supplier of generic HYCD/APAP with 300 mg It’s also unclear how long Boca Pharmacal will remain the sole supplier of generic .

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