Watson to Buy Hoechst Generic Drug Subsidiary

Drug maker Hoechst Marion Roussel said Tuesday that it will sell its generic drug subsidiary, Rugby Group Inc., to Corona-based Watson Pharmaceuticals Inc.

Hoechst Marion, the Kansas City, Mo.-based pharmaceutical unit of Germany’s Hoechst, said Watson will pay an initial $70 million for Rugby Group. Further payments are contingent on certain products and future operating results. The companies didn’t give a total value for the sale of Rugby.

Hoechst has said it’s reviewing its stakes in the generic business. Germany’s largest chemicals and pharmaceuticals maker has interests in three other generic drug makers--Copley Pharmaceutical Inc. in the U.S., Arthur H. Cox in Britain and Berk in Japan.

Allen Chao, chairman and chief executive officer of Watson, said: “Rugby has numerous owned or licensed products that complement Watson’s existing line of products, and our new, expanded product line is expected to enhance our standing with our customers.”

The acquisition will enable Watson to nearly double its manufactured generic products and expand its new product pipeline, he said.

Watson shares rose $2.50 to close at $51.51 on Nasdaq.

“The decision to divest Rugby is consistent with our company’s near- and long-term global strategy,” said Peter W. Ladell, chief operating officer of Hoechst Marion Roussel and president of the company’s North America business.

“Direct participation in the generic drug business is not part of our core business strategy, which is to discover and develop novel, branded pharmaceutical therapies for important human illnesses,” he said.

The transaction, which would make Norcross, Ga.-based Rugby a wholly owned subsidiary of Watson, also includes Rugby’s product development group, Chelsea Laboratories.