King of the generics, for now
No comparable mergers threaten supremacy of Teva-Ivax acquisition, analysts say.
July 25, 2005: 12:01 PM EDT
By Aaron Smith, CNN/Money staff writer
NEW YORK (CNN/Money) - Teva's acquisition of Ivax puts pressure on other generic drug makers to consolidate, but there are no potential deals of similar size and diversity that would threaten the company's No. 1 spot, analysts say.
"For the remaining players it's going to be tough," said Andrew Forman, analyst for WR Hambrecht. "It's tough already."
Analysts praised Teva's $7.4 billion acquisition for catapulting the company to the leadership position among generics companies and for providing global and market diversity with little overlap.
"There's going to be advantages of scale and if you can't compete on that, you're going to get left out of some areas," said Richard Watson, analyst for William Blair & Co., referring to Teva's competitors. "You could see some of these smaller guys get muscled out of some of the markets and actually lose market share."
Following its Monday acquisition of Miami-based generic drug maker Ivax Corp. (up $2.52 to $25.40, Research), Israeli company Teva Pharmaceuticals Industries (up $0.32 to $31.48, Research) now has a market capitalization of $20 billion, compared to $5.5 billion for Mylan and $3.8 billion for Watson, according to Ken Cacciatore, analyst for SG Cowen & Co.
"Certainly now with this deal Teva has completely distanced itself from all the other competitors," said Cacciatore.
Analysts said there are no other potential deals in the generics industry on the same size and scope as Teva-Ivax, which has $8 billion in combined annual sales. Mylan Laboratories (up $0.01 to $17.53, Research) and Watson Pharmaceuticals (down $0.07 to $29.53, Research) might grab up smaller niche players, or might get bought out by European drug giants Novartis (down $0.04 to $48.72, Research) or Sanofi-Aventis (up $0.25 to $42.55, Research), but a Mylan-Watson merger is an unlikely scenario, said Casey Alexander, analyst for Gilford Securities, Inc.
"It's very difficult in this world to do a marriage of equals," said Alexander. "I would find a Mylan and Watson deal very difficult to do."
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