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Andrx: Many Hurdles Before The Deal Is Done


Generic-drug maker Andrx (ADRX) agreed on Mar. 13 to be acquired by Watson Pharmaceuticals (WPI), No. 3 in generics, for $1.95 billion, or 25 a share, all in cash. But MMI Investments, the biggest stakeholder, with 12.3%, plans to oppose the deal, which is still awaiting regulatory approval, and others could follow suit. Hours before the announcement, MMI had bought 420,000 shares at 20.96 to 21.60 apiece. When the news broke, "I was shocked," says MMI President Clay Lifflander, who had been buying almost weekly since December. Shareholders usually are overjoyed when a buyout takes place. But Lifflander says the timing is bad. In early September, the Food & Drug Administration halted the approval of new Andrx generics, estimated to have market potential of $2 billion, over questions on the Andrx production facilities. Lifflander says the FDA may lift the ban after another plant inspection. When that happens, the value of Andrx will skyrocket, he says, and the stock, now at 23.69, could be worth 40 in 12 to 18 months. "Andrx will have to convince me about the deal's advantage to shareholders." Amy Stevens of Susquehanna Financial Group, who rates Andrx "neutral," says "it remains a possibility the deal won't go through." zz

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial


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