This would have to be a friendly one. LCI stock is closely held.
World's Biggest Generic Drugmaker Adds Muscle With Acquisition
*
Just as Teva Pharmaceutical is busy digesting its latest buy, management is working up an appetite for more.
Teva (NasdaqGS:TEVA - News), the world's largest manufacturer of generic drugs, got a nice boost from its December purchase of Barr Pharmaceuticals.
The acquisition of Barr, the world's No. 4 generic drugmaker, enhanced Teva's U.S. generic business and strengthened its global presence. It also extended Teva's lineup into women's branded and generic health care products.
The Israeli company paid $7.5 billion for Barr. This follows the 2006 deal that vaulted Teva to the leading generic drugmaker. Teva paid $7.9 billion for Ivax, a maker of generic and branded products.
Teva has done a lot of buys over the years. From 2004 to '06, it did six deals, three of which were last year.
But the Ivax and Barr acquisitions were especially important, says William Marth, chief executive of Teva North America.
"They have given us a strong base to spring forward," he said.
Nice Complements
Both complemented parts of its business, enhanced its generic business, increased its global reach and expanded its lineup of branded products.
Now, management would like to do more buys, says Marth.
Today's sagging economy presents the opportunity for some good deals. "With the market the way it is, we want to be able to do another acquisition sooner rather than later," he said.
Among the candidates it would consider are companies looking to sell off lines or franchises, he says.
Analyst Kevin Kedra of Gabelli & Co. says we could see Teva doing some small deals. But he doesn't expect it to do any large buys until it digests the Barr acquisition, which may be in another two years or so.
Teva has a diverse lineup. In addition to generics, it makes proprietary brand products. In neurology, its products are centered around Copaxone for multiple sclerosis and Azilect for Parkinson's disease. Its respiratory products include ProAir for treating bronchial spasms. It also supplies active pharmaceutical ingredients to generic and branded drugmakers.
The Barr acquisition helped Teva expand and diversify on a few fronts, says Marth.
At the time of the buy, Barr marketed more than 120 generic and proprietary products in the U.S. and 1,025 outside the U.S. It operated in more than 30 countries.
On the product front, Teva gained a new business in women's health. It added both generic and branded products to Teva's business.
Branded products include Seasonique oral contraceptive and the Paragard intrauterine device.
At the same time, the purchase built up Teva's U.S. generic business and expanded its global reach in generics.
The buy strengthened Teva's position in key Central European and Eastern European markets, the company says.
"Barr gave them a large European footprint, especially in some of the emerging growth markets in Eastern Europe," said Kedra.
Barr gives Teva a nice revenue boost. Teva estimates it will post $14.1 billion to $14.6 billion in sales this year. That compares with sales of $11.09 billion in 2008, prior to acquiring Barr.
Teva expects the transaction will generate annual cost savings of over $400 million within the third year of the deal. Savings will be generated in areas such as manufacturing and R&D. That's up from the $300 million it had expected when it announced the buy.
Teva expects the deal to be accretive to earnings at the end of this year's third quarter. It had originally expected it to be accretive in the fourth quarter.
Strategically, Teva's acquisition of Barr builds upon its purchase of Ivax.
Marth calls the Ivax acquisition "transformational." It gave Teva complementary product lines in generics and brought global diversity, with a strong presence in areas such as Latin America, Central Europe and Eastern Europe. It also added to Teva's generic business in the U.S.
Plus, it gave Teva a respiratory division with branded products, says Marth. "It added something in multiple areas," he said.
Both Barr and Ivax helped build Teva's family of branded businesses.
Teva is faring well on the financial front. Earnings have grown by double digits in four of the past five quarters. And sales have increased at a double-digit pace in 10 of the past 11 quarters.
In the fourth quarter, earnings rose 10% to 76 cents a share. Sales climbed 11% to $2.8 billion.
Analysts polled by Thomson Reuters expect full-year earnings to rise 15% to $3.28 a share, then another 30% to $4.25 in 2010.
As the world's biggest generic drugmaker, Teva is reaping the benefit of greater use of generic drugs to bring down health care costs.
"Our generic drug business is large and growing," said Marth.
In the U.S., Teva has a roughly 16.4% share of prescriptions dispensed.
And with health costs rising fast and generics much cheaper than branded drugs, the climate for its business remains strong.
"President Obama has addressed the issue of health care and lowering costs, and generic drug utilization is one of the best ways to do so," said Kedra.
And the president's push to increase health care coverage for more individuals should help drive greater use of generic drugs.
More Than Generics
It's not only its generic business that's propelling its growth. A big driver is the fact that Teva's business covers many segments across many areas, says Marth.
"We're not just a generic company," said Marth. "We sell active pharmaceutical ingredients and are a leading provider to the generics industry and also sell to branded companies. We're also a branded company with a neurology division, a respiratory division and women's health division."
Teva has a rich pipeline. It has filed 201 abbreviated new drug applications, or ANDAs, with the Food and Drug Administration, says Marth. An ANDA is an application for a generic drug approval for an existing licensed medication or approved drug.
Teva is likely to launch at least 25 products in 2009, says Marth.
finance.yahoo.com |
