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Teva takes top generics spot

Teva Pharmaceutical is once again the world's number one generics maker after agreeing to buy US rival Ivax in a $7.4bn cash and stock deal

Teva Pharmaceutical is once again the world's number one generics maker after agreeing to buy US rival Ivax in a $7.4bn cash and stock deal.

The acquisition stands as the largest ever by an Israeli company and will propel Teva into a group with annual sales of more than $7bn.

Teva was knocked from its number one perch earlier this year when Swiss R&D firm Novartis bought out Germany's Hexal and Eon Labs of the US for a combined $8.3bn.

Israel Makov, Teva president and CEO, said that the tie-up would allow the company to expand and strengthen its global generic and branded businesses and enhance its presence in new therapeutic areas and growth markets, such as Central and Eastern Europe and Latin America.

Teva will gain access to Ivax's respiratory business, including its line of inhalers, as well as the rights to make generic copies of brand-name drugs such as Pfizer's depression treatment, Zoloft, and Merck's benign prostatic hyperplasia drug, Proscar.

With a recent Merrill Lynch report predicting that branded drugs with annual sales of $21.4bn are expected to face generic competition (with an additional $17.7bn in 2007), generics investors are getting excited at a projected wave of patent expirations on blockbuster drugs.

However, some analysts remained cautious about big profits being made in the generics sector, citing increased competition as a reason for keeping prices down.

ìAlthough those numbers sound great, generics companies make their money in the first six months when they have the exclusivity period,î commented Denise Anderson, analyst at Kepler Equities. ìRecently we've seen some companies run into complications with the Food and Drug Administration over whether their exclusivity has expired. Frankly, after that it's like a commodity chemicals business.î

Jim Featherstone, head of European consulting, pharmaceuticals, at Wood Mackenzie, said that it was imperative for companies like Teva to attain critical mass in order to discount and compete.

ìI think markets such as Russia, Eastern Europe and Latin America are incredibly important,î he added. ìGoing forward there's going to be an increasing focus on these markets as growth areas but they're going to be very price sensitive so generics will play a major part in them.î

Kepler's Anderson said that despite its newly acquired size and reach, Teva could face a tough challenge in the growing markets: ìIt's a real challenge to do it right - in a lot of these countries, there are already several local producers of low priced drugs so it's not like they can just walk in and automatically take the market.î

30th September 2008

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