ISRAEL 
HIGH-TECH & INVESTMENT REPORT

from the September 2008 issue


Teva to buy Barr Pharma for more than $7b.

Teva Pharmaceutical confirmed its purchase of rival generic drugmaker Barr Pharmaceuticals for nearly $7.5 billion in a move that will boost Teva's dominance as the world's largest generic drugmaker.

The deal continues consolidation of the generic-drug sector, driven by growth prospects as governments and other payers turn to the lower-priced medications and by the impending expiration of brand-name drug patents worth billions of dollars a year.

Israel-based Teva Pharmaceutical Industries Ltd. said acquiring Montvale, N.J.-based Barr Pharmaceuticals Inc., the world's No. 4 generic drug maker, will also expand its presence in U.S. and other key markets, from Russia to Eastern and Central Europe. Analysts called the deal a great comination for both companies, and Barr shares jumped by double digits on the news.

"This was the 12th attempt to acquire Barr, and the third by Teva," Barr's chief executive, Bruce Downey, told analysts during a conference call. "This is the right price, the right time and the right opportunity." Barr shareholders will receive $39.90 in cash and 0.6272 of a Teva American Depositary Receipt for each share they own, a total of $66.50 per share. Teva also is offering to assume $1.5 billion of Barr's debt.

Barr shares finished at $46.82 before reports a deal was in the works sent the stock up 22 percent.

The deal is expected to close at the end of this year. Teva said it should bring $300 million in annual savings within three years and add to profits within a year.

Shlomo Yanai, Teva's CEO, said the two companies have minimal overlap in products and that Barr would add to his company's products and research pipeline, particularly in women's health.

"I cannot imagine a company that could be a better fit with Teva, our business, our people, our values," Yanai said. At the end of july trv nnounced its finncial results. Teva Pits second-quarter profit rose, helped by strong North American sales of generics and its branded drugs.

Quarterly net income increased 5 percent to $539 million, or 65 cents per share, compared with $515 million, or 63 cents per share, a year earlier.

Net sales at the Israel-based company rose 18 percent to $2.82 billion.

Analysts on average expected Teva -- which earlier this month said it would buy smaller rival Barr Pharmaceuticals

The combination is part of a trend toward globalization over the past five years, with U.S. and foreign generic drugmakers expanding into each others' territory through increased marketing, new products or acquisitions, said Doug Long, a generics analyst at health data firm IMS Health.

In addition, drugs with sales exceeding $54 billion a year are set to lose patent protection from 2008 through 2012, according to prescription benefit manager Medco Health Solutions.

Last month, Japanese pharmaceutical company Daiichi Sankyo Co. agreed to pay more than $4 billion for a controlling stake in Indian generic drugmaker Ranbaxy Laboratories. Ranbaxy battled last fall for the generics business of Germany's Merck KGaA before losing to generic maker Mylan Inc. And Barr bought Croatian drugmaker Pliva d.d. in 2006, outbidding Iceland's Actavis Group. Cowen & Co. analyst Ken Cacciatore called the deal "a very positive strategic transaction" and said Barr could complement Teva's future efforts to produce generic versions of biologics, or drugs made from living cells and tissues.



Reprinted from the Israel High-Tech & Investment Report September 2008

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