Generic drugmakers high on deals: Teva is buying Barr Pharmaceuticals

by Kristi Park, July 21st, 2008, 7:00 am

Hot on the heels of Fresenius’ proposal to buy APP Pharmaceuticals, consolidation in the generics industry continues unabated with two giants in the sector agreeing to make a match. The world’s largest generic drugmaker, Israel’s Teva Pharmaceutical Industries, announced Friday it would buy Barr Pharmaceuticals, a US-based player with about $2.5 billion in sales in 2007.

Teva is paying a cool $7.5 billion for Barr, in a deal most agree makes sense for the Israeli firm. The acquisition of Barr expands Teva’s market share in the US (particularly in the area of oral contraceptives, Barr’s bread and butter) and gives it presence in fast-growing markets in Central and Eastern Europe, markets Barr entered in 2006 with its own acquisition of Croatian firm PLIVA.

Additionally, the deal adds Barr’s proprietary prescription drug unit Duramed to Teva’s small portfolio of brand-name drugs and expands Teva’s efforts in the nascent field of biogenerics (off-brand versions of difficult-to-replicate biological drugs). Barr’s efforts with biogeneric development — another operation gained with the PLIVA acquisition — will complement Teva’s purchase earlier this year of CoGenesys, a privately held biotech firm formerly part of Human Genome Sciences.

Teva has already been in expansion mode in 2008. In addition to buying CoGenesys, it is in the process of acquiring Bentley Pharmaceuticals’ Spanish drug business. The buying spree is part and parcel of Teva’s intention (announced this year) to reach $20 billion in annual revenue with 20% profit margins by 2012.

The Teva/Barr deal is just the latest (and biggest) in a run of acquisitions and mergers in the generics sector, which is growing at a considerably faster clip than the brand-name pharmaceuticals industry. Last year Mylan bought Merck KGaA’s generics business, a business Teva also made a bid on, for $6.7 billion. And this year, we’ve already seen big deals between Daiichi Sankyo and Ranbaxy, and Fresenius and APP. Nobody expects the trend to stop — only question is, who will be next?