Generic drugs sector keeps consolidating
Last week saw the announcement of an acquisition offer by Iceland-based generic drug maker Actavis Group for Pliva, a generic drug maker in Croatia. The deal, for $1.6 billion, would make Actavis the #3 generic drug maker in the world (after Teva and Novartis).
Pliva recently sold off its research and development division to prescription pharmaceutical leader GlaxoSmithKline, in order to concentrate on the generic drug business.
Actavis has been shopping over the past few years, acquiring the US's Amide, Czech Pharma Avalanche, Hungary's Keri Pharma, Bulgaria's Higia, and India's Lotus Laboartories in 2005, along with the human generics business of the US's Alpharma. Actavis changed its name from Pharmaco in 2004.
In the US, generic drug maker Watson Pharmaceuticals Inc. announced it will buy rival Andrx Corp. for $1.9 billion. The deal will create the US's #3 generic drug maker based on prescriptions dispensed.
These new deals join such big recent deals as last year's acquisition by Novartis of Hexal and Eon Labs for $8.3 billion, and Teva's acquisition of Ivax Corp. for $7.4 billion.
In a Bloomberg wire story ("Actavis Makes Unsolicited $1.6 Bln Offer for Pliva", 3./17/2006), the rapid consolidation of the generics industry is explained:
Generic-drug makers are consolidating to use economies of scale to improve their profits. Generic drugs work the same way as branded medicines. Because their makers spend less on research and marketing, the copycats often sell for less than half the price of brand-name equivalents.
Furthermore, the article states, the opportunity keeps growing:
Between 2002 and 2007, pharmaceutical companies including GlaxoSmithKline Plc and AstraZeneca Plc will have lost patent protection on products worth an annual $82 billion in sales, according to London-based industry consultant Datamonitor Plc.
