Teva Acquisition of Barr Anything But Generic

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Researched by Industrial Info Resources (Sugar Land, Texas)--The $7.46 billion merger between Israel's Teva Pharmaceutical Industries Limited (NASDAQ:TEVA) (Petach Tikva, Israel), the world's largest manufacturer of generic drugs, and Barr Pharmaceuticals Incorporated (Montvale, New Jersey), the fourth-largest generic player, has been finalized. The combined company is now a generic powerhouse employing about 37,000 people globally and operating in more than 60 countries. However, in consequence of this strategic acquisition, many of the expansion, renovation and construction projects previously scheduled by the individual companies must be reevaluated to ensure optimization of this new extraordinary synergy.

Together, Barr and Teva had revenue of about $11.9 billion in 2007. By acquiring Barr, Teva moves closer to the company's stated goal of increasing market share of generic prescriptions in the U.S. from 20% to 30%. The Sandoz division of Swiss drug maker Novartis AG (NYSE:NVS) (Basel, Switzerland) is the second-largest maker of generic drugs.

In a statement issued by Teva, the company said that the acquisition not only expands Teva's presence in the U.S., but also "significantly strengthens its position in key European and Central and Eastern European markets." Teva also expects to generate annual cost savings of at least $300 million within three years. Barr bought Croatian generic drugmaker Pliva in 2006, giving it greater reach into Eastern Europe and enhancing manufacturing capacity for biologic drugs. Barr, which specializes in oral contraceptives, is best known for its controversial birth-control drug "Plan B," also known as the "morning-after pill."

The Barr deal is the biggest in the generics industry since Teva's $7.6 billion takeover of U.S.-based Ivax Corporation in January 2006. Teva paid a combination of cash and stock for Barr. Lehman Brothers Incorporated (New York, New York) acted as financial adviser to Teva, and Willkie Farr & Gallagher LLP (New York, New York) provided legal counsel for Teva. Banc of America Securities LLC acted as financial adviser to Barr in this transaction, and Simpson Thacher & Bartlett LLP provided legal counsel for Barr.

In the U.S., the Federal Trade Commission (FTC) ordered the company to give up 16 generic drugs worth $60 million in annual sales. The drugs include popular medications used to treat diabetes, depression and acid-reflux disease, according to an FTC release. The rights to those drugs will be divided between competitors Watson Pharmaceuticals (NYSE:WPI) (Corona, California) and Qualitest Pharmaceuticals (Huntsville, Alabama). Teva also must divest 13 generic drugs that are in development.

In summary, this is a very strategic and somewhat bold acquisition by Teva, as the move will ensure the company's position as the world's leader in generic drugs in the foreseeable future. Teva, as with all pharmaceutical and biotech firms in these precarious economic times, must be strategically prudent when regarding decisions involving expansions, upgrades, consolidations and construction projects. Industrial Info, as part of its Pharmaceutical Tracker - Online Database, will continue to closely monitor and report upon the strategic plans of Teva, as well as all other Pharma/Biotech firms.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.