News September

Generic Drug Companies Bulk up Through Mergers

The generic drug industry, which racked up $61 billion in global sales last year, is in the grips of merger fever.

In the past two years, there have been 18 mergers worth $26 billion, and Tommy Erdei, executive director of UBS Investment Bank's Global Healthcare Group in London, said consolidations are picking up steam.

One type of merger -- finished product makers forming alliances with raw materials suppliers in India and China -- could spell trouble for mid-sized generic companies that simply make tablets and capsules, Erdei said.

"The top generic companies have gotten there through mergers and acquisitions," he said during the Generic Pharmaceutical Association's annual conference in Washington, D.C., this week. "I think those companies that don't participate in that will be left behind."

In some of the most recent deals -- including Teva Pharmaceutical Industries' acquisition of Ivax, Watson Pharmaceuticals' merger with Andrx, and Barr Pharmaceuticals' pending acquisition of Pliva -- key drivers were active pharmaceutical ingredients plants and a broad range of products from pills and liquids to creams and injectables, Erdei said.

In the end, he said, the combined companies can cut costs because they own the source of raw materials.

That has left some small and mid-sized companies in a lurch, Erdei added, as they are confronted with a shrinking number of independent suppliers of raw materials.

Source http://www.nj.com/