Teva acquires Ivax
Israel-baxed Teva Pharmaceutical Company looks like it will regain the #1 position worldwide in generic drugs with its announced $7.4 billion purchase purchase of US-based Ivax Corporation. The move opens the latest round in the consolidation of that growing industry segment.
The move allows Teva to bypass rival Novartis, who, through its Sandoz subsidiary, leaped ahead by acquiring Eon Labs and Hexal earlier this year. Ivax is a major player in the generic segment, #5 in the United States.
A Wall Street Journal article ("Teva to Acquire Ivax for $7.4 Billion ", 7/26/2005) puts some of causes in perspective:
Bigger companies have an edge in the generic-drug industry because they can achieve economies of scale in what is essentially a commodity business. Generic drugs by law must be identical to the original branded drug and are interchangeable.
Furthermore, the article notes that the combined firm "will be in a better position to negotiate with the big buyers of generic drugs, such as chain drugstores and wholesalers."
Only an oligopoly can stand up to an oligpsony (the pharrmacy benefit managers and the pharmacy chains), and generic companies are working harder to become single-source suppliers with clout comparable to Pfizer and Aventis on the prescription drug side.
Ivax is major player in respiratory drugs for asthma, a high-profit area among generic drugs. also has a range of pills, including some brand-name ones. Another are it is strong in is medical diagnostic kits as well as veterinary drugs. Ivax also gives Teva a bigger entrée into Latin America, where it is strong.
Ivax has its own history of acquisitions. A few recent deals include:
- In 2002, the generics business of prescription pharmaceutical giant Merck.
- In 2003, ATP, a maker of inhalation delivery systems
- In 2004, Medco, a Peruvian pharmaceutical company
- Also in 2004, Polfa Kutno, a Polish pharmaceutical company
- In 2005, it acquired animal pharmaceutical company Phoenix Scientific
Inevitably, there is talk of further consolidation among generics, with firms like Barr Laboratories, Watson Pharmaceuticals and Mylan Laboratories possibly up for grabs or else possibly looking for acquisitions themselves.
