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Endo buys Par for $8bn as M&A mania marches on

Acquisitionwill make Endo the fifth largest generics company in the US

Endo International

Another week, and another multibillion dollar acquisition in the pharma sector. Endo is the latest to step up, offering just over $8bn for Par Pharmaceutical in order to boost its generics business.

Par is being sold by private equity firm TPG, which looks set to reap a healthy reward from its investment in Par having acquired the company in 2012 for $1.9bn.

TPG had previously indicated it would exit the business via an initial public offering (IPO). Endo chief executive Rajiv da Silva said buying Par would bolster its generics business with "a strong portfolio of high barrier-to-entry and attractive gross-margin products".  

Paul Campanelli, Par's CEO, will join Endo to lead its generics business. It will make Endo the fifth largest generics company in the US and increase the proportion of its business coming from generics, already at more than 45%.

The generics unit is currently Endo's fast-growing division with underlying organic sales growth of nearly 40% in the first quarter of the year.

Analysts suggested the price being paid was a little high but in line with the value of other recent deals involving mid-cap drugmakers, with opportunities to trim costs by up to $175m a year.

The acquisition comes after Endo tried and failed to merge with Salix Pharmaceutical earlier this year, eventually losing out to rival Valeant, and just a few months after it snapped up urology specialist Auxilium for $2.6bn.

All told Endo has already spent around $10bn on M&A in recent months, closing a generics deal with South Africa's Aspen Holdings earlier this month.

The cash-and-stock offer for Par - which has been backed by the latter's board of directors - differs somewhat from these earlier deals in that it lies somewhat outside the company's traditional M&A focus in specialty pharmaceuticals.

It provides an established revenue stream of more than 100 product lines however and - arguably more importantly for the company - could be a defensive measure as consolidation activity steps up in the generic and specialty pharma sectors. 

Teva is in the throes of an acrimonious bid for Mylan that would catapult it into the top 10 pharma companies globally, while the latter is trying to join up with Perrigo and make itself too big a pill to swallow.

Meanwhile, generic manufacturer Actavis completed its $66bn acquisition of specialty drugmaker Allergan in March.

The total value of M&A in the pharma sector in the first quarter of this year was more than $95bn, according to Thomson Reuters, and for now at least shows no signs of abating.

Article by
Phil Taylor

19th May 2015

From: Sales

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