Quoting "several sources familiar with thesituation" and "people with knowledge of the talks," both Reuters and Bloombergare reporting that Pfizer Inc. is preparing to make an approximately $4 billionoffer for German generic drug maker Ratiopharm GmbH this week, competing withbids from Israel-based Teva Pharmaceutical Industries Ltd. and Icelandic group Actavis.
One source reportedly said that the offer fromActavis was the highest of the three bidders, at close to $4.1 billion, withanother source saying Pfizer was expected to "be competitive" with such anoffer , though the source admitted that Pfizer might still walk away withoutsubmitting a binding offer. Pfizer, the world's largest drugmaker, is reportedto have previously backed off on its earlier interest in Ratiopharm, but wasasked to rejoin the auction and present its bid to Ratiopharm's board andmanagement.
Regardless of who ends up acquiring Ratiopharm, ifthe figures are accurate, it would be the biggest generics takeover since Teva's$7.5 billion purchase of U.S. rival Barr, which was announced in July 2008.
Sources have indicated that a snap decision byRatiopharm in response to the offers is unlikely, and no commitment is likelyto be made by the company to any suitors before the end of March, give or take.
Industrial heir Ludwig Merckle is said to have putRatiopharm on the auction block as part of concessions made to creditors by hisfather Adolf Merckle, who committed suicide in January 2009 after cedingcontrol of his business empire to lenders.
Pfizer and Ratiopharm have both declined tocomment on the speculations.
Pfizer, along with major pharma players likeNovartis and sanofi-aventis, are looking increasingly to the notion of pairingtheir traditional research-based drugs businesses with generic-based businessesas a response to looming patent exclusivity expirations. The idea is to takethe interest in generics and turn it at least partially to their advantage bycapturing as much of that market as they can. That is probably a good strategy,as drugs representing annual sales of $95 billion are facing genericcompetition in the years 2009 to 2013.
It wouldn't be Pfizer's first step along theselines, as the company has already initiated various collaboration deals and acquisitionsto bolster its range of generics, particularly injectable drugs. An alliancewith India's Strides Arcolab Ltd. in January was the most recent move alongthose lines.
Analysts at Credit Suisse have said that gaining control of Ratiopharmcould go a long way to help Pfizer reduce costs at its generic pills business.
Pfizer derives more than $10 billion in sales fromoff-patent drugs at its "established products" unit that it created in 2008,largely from its own medicines that have lost exclusivity, Reuters reports.Bloomberg notes that acquiring Ratiopharm "may expand Pfizer's generic businessto about $11 billion, nearing the size of Teva, the world's largest genericdrugmaker with $13.9 billion in 2009 revenue."
UPDATE
On Friday, March 5, Pfizer CEO JeffKindler reportedly went to Germany to speak to approximately 50 managers at Ratiopharm, and other top executives from Pfizer also attended, referred toRatiopharm's production efficiency as "best in class" according to one personfamiliar with the matter said. Kindler further expressed interest inRatiopharm's biotechnology operations, that source said. Some sources reported in media stories have also suggested that Pfizer may have increased the amount of its offer.
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