Generics are hot: Teva snaps up Barr for $7.4 billion

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JERUSALEM—Its proposed acquisition of BentleyPharmaceuticals earlier this year for $360 million was apparently just anappetizer, as last Friday Teva Pharmaceuticals announced its intention toacquire Montvale, N.J.-based Barr Pharmaceuticals in a cash and stock dealworth more than $7.4 billion. The hungry generic maker also purchased CoGenesyearlier this year for $400 million.
The deal makes Barr the latest global generic drug maker tosuccumb to the consolidation frenzy that is sweeping the generic sector.
Other recent billion-dollar-plus generic deals includeDaiichi Sankyo's $4.6 billion agreement to acquire controlling interest inIndian generic drug maker Ranbaxy and Fresenius' United States market entry viaits $3.7 billion purchase of APP Pharmaceuticals. Also ongoing is the biddingfor Czech generic company Zentiva by Sanofi-aventis, whose $1.9 billion bid wasrebuffed by the company.
With Barr, Teva further solidifies its position as thenumber one generic drug company in the world and picks up Barr's $2.5 billionin annual sales, most of which is derived from its bread-and-butter genericcontraceptives business.
"The combination of our two companies provides an outstandingopportunity strategically and economically. It will enhance our market shareand leadership position in the U.S. and key global markets, further strengthenour portfolio and pipeline, and provide upside to our strategic plan," saysTeva CEO Shlomo Yanai, who has been at the helm of the company for less thantwo years.
The deal, Yanai says, will put the Israeli company ahead ofits stated plan to double its overall sales by 2012. In all, Barr is expectedto add important economies of scale for Teva—an important factor in the lowermargin generics business—and provide as much as $300 million in savings to thecompany through consolidation.
The acquisition of Barr is of a slightly different flavorthan others it has completed in the past.
"Teva's acquisitions focused mainly on acquiring assets thatprovided it with delivery technologies and/or geographic exposure, whereas apotential acquisition of Barr Pharmaceuticals would provide Teva with access tothe oral contraceptive market, enhance Teva's presence in Central and EasternEurope, and be an opportunity to eliminate duplicate infrastructure in the US,"said Ricky Goldwasser, an analyst at UBS Investment Research, in a news reportin The Jerusalem Post.
When completed, Teva will have combined annual sales ofroughly $12 billion, with more than 37,000 employees and operations in 60countries.

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