Are Generic Drug Makers Entering Merger Frenzy After Teva/Barr?
Barr Phamaceuticals Inc. (NYSE: BRL) actually turned out to be a real merger. Teva Pharmaceutical Industries (NASDAQ: TEVA) has agreed to acquire the generic US-drug maker in a merger valued at $7.46 Billion in cash and stock. The breakdown is $39.90 cash and 0.6272 shares of TEVA for total of $66.50 before any dilution. This is after the stock closed up more than 23% yesterday on reports that Teva was interested in buying the company.
Teva is a huge generic drug makers and it has some of its own brand name drugs. What you have to wonder is just how many other mergers are out there that could actually come to pass in the generic sector. Generics are likely to do well in sales as a sector because of medical and health care cost containments and because so many key blockbuster drugs are coming off of patent in 2009 to 2011.
On an individual basis these companies are essentially stepping on each others’ toes as they frequently get FDA approvals for the same drugs as other generic companies after the brand drugs come off patent. It also doesn’t help when brand drug Big Pharma companies decide to sell their brand drug for the same price as generics after they come off of patent.
So maybe mergers in the generic drug sector are inevitable. Here is a list of some of the larger generic drug companies:
- Mylan, Inc. (NYSE: MYL) $3.9 Billion market cap,
- Watson Pharma (NYSE: WPI) $3.1 Billion market cap,
- Par Pharma (NYSE: PRX) $610 million market cap.
As a reminder, there was a time period where King Pharmaceuticals Inc. (NYSE: KG) was trying to merge with Mylan, Inc. (NYSE: MYL). All of these stocks are trading up marginally so far this morning as of 10:00 AM EST.
Jon C. Ogg
July 18, 2008
Teva & Barr… Possible Generic Super-Giant Merger (TEVA, BRL)
Teva Pharmaceutical Industries Ltd. (NASDAQ: TEVA) is reportedly in talks to buy Barr
Pharmaceuticals Inc. (NYSE: BRL). This report is out of Globes, which labels itself as Israel’s Business Arena if you are not familiar with it. The deal terms are listed as “Assuming Teva pays a premium for the firm, its price would be over $5 billion.”
Barr Labs closed up 1.6% today at $46.82, but its market cap at that price is already $5.06 Billion. Shares popped 15% to $54.11 in late after-hours trading after the report came out. That gives a new implied market cap of about $5.8 Billion. Barr’s 52-week trading range is $37.40 to $58.38; and shares were nearly $70.00 at the start of 2006.
The trick to determine is just how much of an “assuming.. above the $5 Billion mark” Teva would be willing to go. Teva’s market cap is nearly $33 Billion based upon a $42.41 close Wednesday.
Stay tuned on this one.
Jon C. Ogg
July 16, 2008