Watson Pharmaceuticals Rises After Arrow Buyout

NEW YORK (AP) — Shares of Watson Pharmaceuticals Inc. advanced Thursday, a day after the generic drugmaker moved to boost its U.S. sales and expand its international presence by buying Arrow Group.

Watson said it will pay $1.75 billion in cash and stock for Arrow, which had $647 million in revenue last year, and has to sell a generic version of Pfizer's cholesterol drug Lipitor in the U.S. starting in 2011. In midday trading, Watson shares rose $1.44, or 4.8 percent, to $31.71.

In a note to clients, Citi Investment Research analyst John Boris said the acquisition makes sense for Watson, which does almost all its business in the U.S.

"Watson needed to increase its ex-U.S. exposure to offset U.S. generics competition and price erosion," he said.

Boris said about three quarters of Arrow's revenue comes from the U.S., France, Canada and the U.K., but Watson will use the deal to expand into Central and Eastern Europe, Brazil and Japan, the world's second-largest pharmaceutical market. Watson says Arrow has products registered in other countries where it doesn't currently have any marketing operations.

The analyst kept a "Hold" rating and a price target of $34 on Watson stock. Shares of the Corona, Calif.,company have traded between $20.17 and $32.95 over the past year.