Watson Pharmaceuticals looks set to become the world’s third largest generic drug manufacturer with its acquisition of Switzerland-based Actavis.

The acquisition, which is valued at around $5.6bn, will add Actavis’ portfolio of more than 1,000 products, taking Watson’s annual revenue from $5.4bn to around $8bn, overtaking US-based Mylan. Teva Pharmaceutical and Sandoz currently sit first and second respectively.

The deal, which is expected to close in the fourth quarter of 2012 should it receive regulatory approval, could also see Actavis shareholders receive up to 5.5 million shares in Watson should the company meet performance goals.

Watson has been boosted in recent months after reporting a 29% increase in revenue for 2011, courtesy of its generic version of Lipitor. The company also announced a collaboration with biotechnology company Amgen for the creation of biosimilar versions of cancer medications to be sold under a joint Amgen/Watson brand.

Watson CEO and president Paul Bisaro said that the transaction dramatically enhances the company’s commercial position on a global basis and adds complementary products and capabilities in the US.

"In a single, commercially compelling transaction, we more than double Watson’s international access and strengthen our commercial position in key established European markets as well as exciting growth markets, including Central Eastern Europe and Russia," Bisaro added.

"The transaction achieves Watson’s stated strategic objective of expanding and diversifying our business into a truly global company. Once the transaction is completed, approximately 40% of our generic revenues will come from markets outside of the US."