Posted on Sat, Jul. 19, 2008
Teva Pharmaceutical Industries Ltd., an Israeli company with North American headquarters in North Wales, agreed to pay $7.46 billion for rival generic-drug maker Barr Pharmaceuticals Inc., the two companies said yesterday.
Teva, which employs 1,500 at four locations in the Philadelphia suburbs, said the deal would expand its already leading share of the generic pharmaceutical market in the United States and strengthen its presence in key Eastern European markets.
The deal is an "unparalleled combination of people and products," William S. Marth, president and chief executive officer of Teva North America, said in an interview.
With the addition of Barr, Teva's U.S. operations will pick up $1.2 billion in annual sales of generics and an annual rate of $500 million in sales of branded drugs, Marth said. In addition, the deal adds $850 million outside the United States, primarily in the European Union and in Eastern Europe, Marth said.
Buying Barr will increase Teva's leading share of the $28.7 billion U.S. unbranded generic-drug market to 22 percent from 18 percent, according to data from IMS Health, which tracks prescription-drug sales.
Over the last five years, U.S. sales of generic prescription drugs (including those sold under a trademark name) have grown on average nearly 14 percent a year, compared with average growth of close to 7 percent for drugs that remain under patent protection, according to IMS data published by the Generic Pharmaceutical Association.
Teva had $9.4 billion in sales last year. Barr's sales were $2.5 billion. Together, the two companies operate in 60 countries and have 37,000 employees.
Barr is based in Montvale, N.J. It has a research facility in Bala Cynwyd. Teva also has facilities in New Britain, Sellersville and Horsham.
Marth said he anticipated that Teva's North American headquarters would remain in the Philadelphia area, but he said it was too early to discuss how jobs might be affected in the combined company.
Barr's portfolio of birth-control pills and other women's health products as well as its capabilities in biotech medicines - a potentially huge area for the generic-drug industry - were important drivers of the deal, which valued Barr at $66.50 per share, analysts said. The price represents a 42 percent premium over the stock's closing price on Tuesday, before rumors of the deal started.
Barr's shares gained $6.26, or 11 percent, to close at $63.43 on the New York Stock Exchange. Teva's American Depository Receipts traded on Nasdaq gained $1.82, or 4.4 percent, to close at $42.87.
Analysts praised the proposed combination, which has been approved by both boards of directors and awaits approval by Barr's shareholders and regulators.
"I think it's a terrific combination for both companies," analyst David Buck, of Buckingham Research Group, told management during a conference call yesterday.
The generic-pharmaceutical industry has been steadily consolidating. Investment research firm Sanford C. Bernstein counted 23 deals globally worth $44 billion in the last three years, according to a report yesterday by analyst Aaron Gal.
Gal said the purchase of Barr does not solve Teva's problem with Copaxone, a proprietary drug for multiple sclerosis that faces a decline in sales in 2012, when Gal expects it to face new competition. The medicine accounted for 18 percent of its sales last year.
On the plus side, Barr has six generic drugs it might be able to start selling in the next 12 months, according Frank Pinkerton, a Banc of America Securities analyst.
Contact staff writer Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.com.
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