Croatian drugmaker Pliva posted results showing a healthy growth in its generic drugs business this morning, raising the stakes in the tug-of-war to acquire the company currently being waged by Iceland’s Actavis and Barr Laboratories of the USA.

The lingering impact of the patent expiry on azithromycin and a steep decline in bulk sales of the drug to licensee Pfizer meant that overall sales in the second quarter of the year fell 11% to $246 million, but the generics division's sales grew 15% to $224 million on the back of gains in Central and Eastern Europe and the USA.

Pricing volatility in Western Europe held back sales, with gains in the UK and Spain offset by the German business, which was hit by lower reference prices, price reductions and compulsory rebates, as well as a steep decline in Italian sales owing to "weaknesses in internal control and accounting practices."

The costs associated with managing the takeover process and the effects of the loss of azithromycin business ate into earnings before interest and taxes, down 75% to $15 million. But, mirroring the pattern with sales, the generics business’ EBIT (earnings before interest and tax) advanced 43% to $16 million.

Meanwhile, Pliva Pharma Chemicals, which makes azithromycin and other active pharmaceutical ingredients, saw its turnover plummet 78% to $7 million.

The strong figures for Pliva’s generics business are expected to spur on the bidding war between Actavis and Barr. The Icelandic company raised its offer for Pliva to $2.5 billion last week, trumping a $2.3 billion bid from Barr, but analysts believe the latter is gearing up to make another counter-offer.

The winner of the bidding will become the world's third- biggest generic drugmaker, behind Israel's Teva Pharmaceutical Industries and the Sandoz business of Switzerland's Novartis.