Halsey, Watson Form Alliance

Halsey Drug Co. Inc. (Rockford, IL) and Watson Pharmaceuticals Inc. (Corona, CA) have completed multiple agreements. The terms of the agreements call for Watson to: purchase an ANDA from Halsey, have the right to negotiate for Halsey to manufacture and supply certain future products to be developed by Halsey, and extend a $17.5 million loan to Halsey.

Under the agreement, Halsey will sell of a pending ANDA and related assets to Watson for $13.5 million, paid in three installments as certain milestones are achieved. As part of the transaction, the companies executed multi-year supply agreements relating to the product.

Watson also receives a right of first negotiation to purchase specified active pharmaceutical ingredient (APIs) and finished dosage products to be developed by Halsey. Terms of the supply agreements relating to the identified future products will be negotiated by the parties generally about the time of Food and Drug Administration (FDA) approval.

In addition, the deal provides for an extension of a $17.5 million term loan to Halsey by Watson. The loan is secured by all Halsey's assets, is senior to the existing liens securing the company's outstanding indebtedness, carries a floating interest rate of Prime plus 2%, and matures in three years.

According to Halsey president and CEO Michael Reicher, the agreements provide the company with the capital necessary to expand its manufacturing facilities, especially the facility that manufactures APIs, and bring products currently in development pipeline to market.

The deal also provides a ready customer for the resulting products. "Halsey expects to produce not only APIs for Watson but also manufacture certain finished dosage products as well," Reicher added. The development time for the API's covered by these agreements is expected to be one to three years.

In related news, Halsey announced that the remaining investment of $5 million in subordinated debentures expected to be made in 2000 by Oracle Partners as part of a May 1999 financing will no longer be made, by mutual agreement.

Halsey Drug Company Inc. and its subsidiaries manufacture generic drugs in solid and liquid dosage forms sold to distributors, wholesalers, drug store chains, institutions, government agencies, and other pharmaceutical manufacturers nationwide. The company also manufactures active pharmaceutical ingredients.

For more information: Peter A. Clemens, Vice President and Chief Financial Officer, Halsey Drug Co., 695 N. Perryville Rd., Crimson Bldg. No. 2, Rockford, IL 61107. Tel: 815-399-2060 or 800-336-2750. Fax: 815-399-9710.

Edited by Jim Pomager