Teva eyes new markets following Barr purchase; DOJ targets Ranbaxy

Teva Pharmaceutical Industries has elaborated on its recent purchase of Barr Pharmaceuticals. The deal, valued at US$7.5 billion, raises interesting questions about Teva’s new scope. The two firms held an acquisition luncheon a few days after the announcement, in which they emphasised the strong strategic fit between the two companies, its expanded product portfolio and pipeline and its increased presence in first-to-file/paragraph IV applications.

Most significantly, Teva discussed its strengthened presence in key global markets; post-takeover, Teva will be able to offer direct sales in more than 60 countries. Eastern and Central Europe were highlighted as areas of strength for the combined firm. Barr and Teva combined would have been ranked fifth in Germany, third in Poland, ninth in Russia and first in Croatia in 2007. The new presence in Europe will be complemented by Teva’s new Spanish capabilities, following the successful completion of Teva’s Bentley Pharmaceutical purchase.

As for future growth opportunities, Teva CEO Shlomo Yanai noted in an interview with the Financial Times that he is now keen to forge a joint venture in Japan to capitalise on the country’s fast-growing generics market. "Right now Japan is more ripe for generics, (but still) difficult to break into," Yanai commented. Japan has traditionally been reluctant to accept generic medicines; the government has been keen to change habits, however, in an attempt to reduce medical costs. Recent rule changes compel generic substitution unless a doctor specifically requests a patented drug on the prescription form.

Any attempt by Yanai and Teva to get into the Japanese generics market is likely to come after Ranbaxy’s entrance via Daiichi Sankyo, which is in the process of buying the Indian firm. The deal between the two is still on track, in spite of recent allegations from the US Department of Justice against Ranbaxy. The DOJ claims that the company submitted false information about stability and bioequivalence to support ANDAs for antiretrovirals distributed by the President’s Emergency Plan for AIDS Relief (PEPFAR) programme. Prominent Congressmen in the US House Committee on Energy and Commerce have now indicated that it will soon commence a formal investigation into the Ranbaxy drug approvals and potential violations of GMP regulations. The moves have seemingly not deterred Daiichi however, which has been keen to stress that its share purchase agreement with Ranbaxy is binding and final.

Jonathan Way - Editor, World Generic Markets

Teva buys Bentley

Teva Pharmaceutical Industries has agreed to acquire Bentley Pharmaceuticals for US$360 million. US-based Bentley manufactures both branded generic and generic products; its principal market is Spain, though it also sells generic pharmaceuticals in other parts of the EU. These efforts are supported by finished dosage and API manufacturing facilities. Teva noted that it intends to make Bentley's generic pharmaceutical operations serve as the platform on which Teva hopes to build a leading position in Spain.

The Bentley purchase follows a string of investments from Teva in the region. In January, the Israeli manufacturer announced its plans to expand its operations in Hungary, with an investment of US$100 million at its Debrecen site. It then announced in March that it is expanding its operations in Ireland, with a €65 million (US$99.6 million) investment in its existing Waterford facilities in the southeast of the country. Later in the month, meanwhile, Teva’s IVAX unit revealed that it is to spend CZK1 billion (US$60.7 million) to expand its Opava plant in north Moravia, Czech Republic. This aggressive European expansion follows Teva CEO Shlomo Yanai’s recent comments that Teva should double its revenues by 2012; clearly, the new CEO feels that Europe is where the firm’s immediate priorities lie.

Teva’s European expansion is being mirrored by Aurobindo Pharma, which has just announced that it is to purchase the Italian operations of German pharmaceutical company TAD Pharmaceuticals. The TAD Italy purchase is Aurobindo’s third in Europe, following the purchase of Milpharm, and Pharmacin International in 2006 and 2007.

The latest acquisitions correlate with industry insiders’ predictions that a handful of generic manufacturers will lead the drive towards consolidation; Aurobindo will be hoping to be amongst this group, while Teva will certainly feature. Both have adopted a similar strategy of targeting markets where generics are less well established, i.e. Italy and Spain. It will be interesting to see if this tactic is more fruitful than a focus on established markets, where firms have recently been struggling to digest acquisitions.

Jonathan Way - Editor, World Generic Markets