The rumour in an Israeli newspaper that Teva is in talks to acquire US generic firm Barr Pharmaceuticals has led to a blaze of speculation among analysts and investors who see such a deal as a possible option.
As PharmaTimes World News reported yesterday, the Globes business newspaper, citing undisclosed sources, claimed that the Petah Tikva-headquartered firm may be preparing a bid of over $5 million (and possibly up to $7.5 billion) to buy the New Jersey-based group. That report has provided a major boost to Barr’s share price – the stock closed last night at $57.25, up 22.3%.
It has also created a lot of interest among brokers. Goldman Sachs issued a research note saying that while the reports of talks are unconfirmed, “we expect investor focus on generic consolidation to increase and possibly lift sector valuations”. However, the analysts added that “our initial reaction from a Teva perspective (assuming credence behind the report) would be surprise on both timing and target”.
Still, GS went on to say that “at the risk of getting ahead of ourselves given the lack of any corporate commentary”, such a combination “would bring attractive product and geography additions to Teva but it doesn’t initially strike us as a need-to- own asset”. Indeed, a Barr link-up “would also add significantly to Teva’s US exposure (albeit without meaningful product overlap) where we see slowing growth in the next three-five years relative to international markets”.
However other analysts see a great deal of logic in the deal. Teva has shown that it is not averse to going down the acquisition track in the past and Ricky Goldwasser at UBS notes that taking over Barr would provide Teva with access to the oral contraceptive sector where the US firm accounts for about 21% of the total market. He added that the deal would enhance Teva’s presence in central and eastern Europe (Barr bought Croatia’s Pliva in 2006) and “be an opportunity to eliminate duplicate infrastructure in the USA.”
Teva said that it had $3.6 billion in cash at the end of the first quarter, so is in a strong financial position. However in February the firm said it expects to double revenues to $20 billion by 2012 and outpace the market and given that the multiple sclerosis blockbuster Copaxone (glatiramer acetate) could be potentially suffering generic competition by then, the contribution of a firm like Barr could be crucial in reaching that target.
