Global Insight Perspective | |
Significance | Barr's resolve over this purchase is indicative of Pliva's value as Central and Eastern Europe's largest domestic drug maker. The acquisition comes at a time of consolidation in the global generics market, as the industry's strongest players clamour for market share. |
Implications | The purchase will render Barr Laboratories the third-largest generics firm in the world, tailing Teva Pharmaceuticals Industries (Israel) and Novartis AG's (Switzerland) Sandoz generics division. Projected annual sales are in the region of US$2.4 billion. |
Outlook | Barr's successful purchase of Pliva is likely to attract other leading generics firms to markets in Central and Eastern Europe and may encourage acquisitions of other leading domestic generic drug firms. Barr's acquisition will boost its presence across significantly Europe and will assemble a comprehensive product portfolio worthy of carving out a greater share of the global generics market in the face of stiff competition in a new era of 'super-generic' companies. |
Barr Pharmaceuticals yesterday (24 October) finalised its acquisition of Pliva, in a deal worth US$2.5 billion, after a long bidding war with Icelandic Actavis, which began in March. Actavis' counter-bidding efforts pushed the total value of Barr's takeover offer up from US$2.2 billion in June 2006. AFP reports that under the terms of the deal, Barr has made a payment of 820 kuna (US$139) for every Pliva share tendered during the formal 'offer period'. At the end of this period the U.S. generics firm was left in control of 95% of the Croatian firm's share capital. Actavis needed to acquire over 50% in order to gain control of the company.
This development essentially means that the financial transaction for the takeover was completed successfully. In reality, Barr's purchase of Pliva was made inevitable when Actavis finally stepped away from the bidding battle last month; in September Barr submitted a bid worth 820 kuna per share in response to a previous increase in Actavis' own offer for Pliva (see Croatia: 12 September 2006: Barr's Latest Offer for Pliva Reaches US$2.5 bil.), but the Icelandic company then refused to budge, with the bidding war finally reaching a plateau. Barr's position was boosted further when the government of Croatia said that it would sell its 17% stake in Pliva to the U.S. company.
Barr has also won approval for the purchase from the U.S. Federal Trade Commission (FTC), subject to minimal divestures by the company. The regulatory authority had been concerned that Barr's purchase of Pliva would eliminate competition and push prices up. The two companies do have competing generic versions in their respective portfolios and pipelines, and Barr had been expecting that its negotiations with the FTC would result in having to sell some lines and effectively tweaking its product line-up. Accordingly, as reported by The Wall Street Journal, the FTC nod comes with the condition that Barr sell four generic lines—the antidepressant trazodone and blood-pressure drug triamterene from its own portfolio, as well as Pliva's branded organ-preservation solution, Custodial, and either Pliva's or its own generic nimodipine, treating ruptured blood vessels in the brain.
Outlook and Implications
The finalisation of this acquisition has created the world's third-largest generic drug maker, with projected annual sales of approximately US$2.4 billion. The fierce bidding battle fought with determination by Barr reflects Pliva's value as the region's largest domestic drug maker. Indeed, despite Pliva's 2005 profit loss of US$41 million, there is growing interest in the potential of this market. Through its first overseas acquisition, Barr is seeking to build critical mass and to boost sales volumes at a time of heightened competition in the global generics market; the industry has seen a spate of high-profile acquisitions over the past two years, sparking the emergence of a so-called breed of "super-generic firms", epitomised by Swiss drug-giant Novartis' expansion of its Sandoz generics division in 2005 (see Switzerland: 21 February 2005: Acquisitions Push Novartis into Pole Position in Global Generics Market). It is highly likely that Barr's acquisition of Pliva will trigger additional purchases in this region by leading generic drug makers; other leading players in Central and Eastern Europe—such as Krka DD (Slovenia) and Bioton (Poland)—could emerge as likely takeover targets.
Pliva will bring to Barr a new strategic advantage of access to markets in Western and Eastern Europe as well as the vast Russian market. Pliva has significant marketing prowess across Europe, and the profile of Pliva products will now be boosted by Barr's sales and marketing machine in the United States. Getting its hands on Pliva's manufacturing facilities will also see Barr reap significant production-cost savings. Despite the necessary divestures in respect of anti-trust regulations, the amalgamation of these two companies will assemble a very comprehensive portfolio of products across a broad range of complementary industry segments—from finished generic formulations and innovative delivery technologies to a range of active pharmaceutical ingredients (API). While integration and consolidation of operations will take many more months, the process will be helped by the fact that the two companies have an existing relationship through a deal for the development of a key biogeneric—a generic version of Amgen's (U.S.) Neupogen (filgrastim).