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
Drug & BioHealth: How Worries May Hurt More Than News (MRK, PFE, BMY, TEVA, AMGN, BIIB, DNA)
It seems that the differences between old Big Pharma key drug powerhouses and established biotech players is becoming more and more of a blur rather than any firm lines. Before you consider this lunacy, remember the analogy that all biotech companies are seeking to become established drug companies. If you have watched Big Pharma mergers with biotechs, you’d wonder why there are any biotechs with drugs or pipelines left on the market.
Today we are seeing pressure on Merck & Co.(NYSE: MRK) after UBS issued some cautious stance on Gardisil sales. What is interesting about this call is that its primary competition on the U.S. drug market was just last week pushed out at least 6 months beyond what most were expecting.
It seems we almost never see a day without Pfizer Inc. (NYSE: PFE) not hitting a 52-week low or not at least being down on concerns that patents will expire and the company’s pipeline looks more like a pie in the sky line.
Bristol-Myers Squibb Co. (NYSE: BMY) has many of the same concerns as Pfizer as many of its investors have thrown in the towel here, but it has the added uncertainty of what this will look like beyond 2008 after the company goes through a miniature break-up.
If you think that generics coming on market is an issue, you may appreciate the irony as we see generics come under pressure from two arena. Big Pharma companies are taking the stance of slashing their prices to meet or come very close to generics as the generics get launched. This causes fears that generic margins will go to hell in a hand basket. Now take Teva Pharmaceutical Industries Ltd. (NASDAQ: TEVA). This one was hit hard recently after Mylan Labs (NYSE: MYL) signed a licensing pact in India to produce a generic version of Teva’s COPAXONE for MS treatment. Yep, that is the generic’s number one name brand drug it makes on its own. Go figure, a generic maker challenged by a generic.
But this doesn’t stop at Big Pharma and doesn’t stop at generics. Even many of the key biotech leader stocks have been under fire of late.
Amgen Inc. (NASDAQ: AMGN) has gone from its own cycle of boom to bust to rust. It ENBREL and other franchises have peaked for the time being over reimbursement rate concerns and Black Box warnings on its drugs with extreme warnings. While the worst is likely behind it and while we feel this is merely priced like a drug stock, there are very few traders looking for a major move in the near-term.
Biogen-Idec (NASDAQ: BIIB) is a worry that almost hasn’t gone away. Sure, the weakness after the post-TYSABRI withdrawal has been overcome, but this stock is believed to have very few prospective buyers based upon the size and target markets with today’s $17+ Billion market cap. We still believe the company mishandled its TYSABRI withdrawal because the treatment benefits looked so much better than the PML side effect percentages.
Take the giant Genentech (NYSE: DNA) for an example. The largest biotech is rapidly becoming a dead money stock. It keeps growing but concerns that its Avastin won’t continue to get perpetual approval to cure all cancers. Throw in the point that its individual drug sales seem to disappoint analysts routinely.
So where do we go from here? We are in an election year and it doesn’t take a rocket scientist to look at the health insurers and other medical-related sectors to determine that caution is going to prevail over extreme bullish sentiment of the past. We still think there will be many substantial mergers in small-cap and mid-cap biotechs and among many of the smaller providers that fit into safe niches. But there is going to be some added pain and caution as the most likely scenario(s) throughout the summer and into the fall in many of the key players in this field of drug and biotech.
At some point we’ll realize how cheap some of the names have gotten, but every effort to identify this as an inflection point has been met with added pain. Many of these companies will start reporting earnings over the next couple of weeks. You can bet that traders will be looking closely to start picking their spots or deciding to stay on the sidelines.
Jon Ogg
July 7, 2008
Big Pharma vs. Indian Generics, The Plot Thickens (PFE, TEVA, MYL)
Pfizer Inc. (NYSE: PFE) is sort of stuck between a rock and a hard place. If you thought that Big Pharma drug companies being under fire because of generic drugs, the issues may about to be getting much more convoluted. There are reports that Pfizer may try to make an acquisition offer for a majority stake in the Indian generic giant Ranbaxy. This would be a counter-bid or counter-fight since Japanese drug maker Daiichi Sankyo’s recent plan to spend up to $4.6 Billion to acquire a majority stake in Ranbaxy.
What is interesting is that Ranbaxy is India’s biggest drug maker. To make matter more complicated, Ranbaxy has been involved in many cases globally over launching generic versions before Pfizer’s patents expire on Lipitor as a cholesterol treatment. Ranbaxy may launch a generic version of Pfizer’s Lipitor as soon as 2010, although this will vary greatly depending on which country it pertains to.
The fighting between generic drug makers and name brand makers is an endless one. Teva Pharmaceutical industries (NASDAQ: TEVA) recently saw a huge hit to its stock because of a generic MS drug out of Mylan Labs (NYSE: MYL) of Teva’s blockbuster Copaxone. Guess where the generic is going to be made….. Mylan teamed with NATCO Pharma, out of India. The irony here is that Teva’s lion share of revenues come from generic drugs that it makes of other Big Pharma labels. The sword cuts both ways.
The wars with generics and Big Pharma makers are only going to get worse and are only going to get more complicated. Throw in the biotech angle and the recent moves where Big Pharma companies have been acquiring biotechs for their prized pipelines. Stay tuned.
Jon Ogg
June 13, 2008
Teva’s Copaxone MS Franchise Under Generic Fire (TEVA, MYL)
Shares of Teva Pharmaceuticals (NASDAQ: TEVA) are under fire this morning, in a move which has more irony than one might guess. Mylan inc. (NYSE: MYL) has signed a licensing pact with India’s NATCO Pharma Ltd. to produce a generic version of Teva’s multiple sclerosis treatment called Copaxone.
This involves access to NATCO’s pre-filled syringes of glatiramer acetate, the generic name for Copaxone. Mylan gains exclusive distribution rights as part of the deal in the United States, major markets in Europe, Japan and elsewhere. NATCO already has commercialized its glatiramer acetate product in India and Ukraine.
Copaxone generated about $1.7 Billion in sales for Teva last year, and the company’s totsal currency-converted revenues were about $9.4 Billion. If you have followed Teva for some time you might appreciate the irony in this if you are not a shareholder. Guess were Teva’s largest revenues come from… generic drugs.
Teva closed at $44.76 yesterday and shares are down over $1.00 in pre-market trading on almost 500,000 shares with about 35 minutes to the open.
Jon Ogg
June 10, 2008
Amgen (AMGN) Claims Osteoporosis Break-Through
Amgen (AMGN) claims that it has developed a new and better drug treatment called denosumab for osteoporosis. The current drug of choice is Fosamax from Merck (MRK).
According to the AP “The one-year, Phase III clinical trial showed post-menopausal women gained more bone mass after transition to denosumab.”
A generic version of Fosamax is marketed by Teva (TEVA).
The news can’t be viewed as good for Merck
Douglas A. McIntyre