The generic-drug industry has undergone a flurry of acquisition activity over the past 18 months, highlighted by the long-anticipated but only recent closing of Teva Pharmaceutical's purchase of the majority of the former Actavis generic assets from Allergan.
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Other major deals in the generic sector, which include several stemming from the Teva Pharmaceutical-Actavis deal are:
- Dr. Reddy's Laboratories purchase of the eight-product portfolio of abbreviated new drug applications from Teva Pharmaceutical (this month)
- Endo Pharmaceuticals Holdings' acquisition of Par Pharmaceutical (September)
- Impax Laboratories' purchase of a 15-product portfolio from Teva Pharmaceutical (this month)
- Mayne Pharma's purchase of other generic assets from Teva Pharmaceutical (this month)
- Mylan's purchase of Meda of Sweden (pending) and Abbott Laboratories' generics (February 2015)
- Nichi-Iko of Japan's acquisition of Sagent Pharmaceuticals (pending and expected to close in the second half)
- Pfizer's acquisition of Hospira (September)
The net effect is to dramatically alter the landscape of the generic industry, adding to the market share positions of the largest companies and introducing several new entrants into the list of top firms worldwide.
In its October review of the industry, EvaluatePharma listed the top 20 generics companies, based on 2014 worldwide revenue. They were:
- Teva Pharmaceutical: $9.1 billion
- Novartis (Sanofi): $8.5 billion
- Allergan (Actavis): $6.6 billion
- Mylan: $6.5 billion
- Sun Pharmaceutical Industries: $4.5 billion
- Aspen Pharmacare Holdings: $3 billion
- Hospira: $2.6 billion
- Sanofi: $2.4 billion
- Fresenius: $2.3 billion
- Lupin: $2 billion
Since 2014, one major provider is out of the business (Allergan/Actavis) and another has changed hands altogether (Pfizer/Hospira), while several other firms are making a play to enter the top 20, if not the top 10.
A new top 10 list, based on pro-forma revenue estimated for this year, might look like this:
- Teva Pharmaceutical: $17 billion to $19 billion
- Mylan: $9.5 billion
- Novartis (Sanofi): $9 billion
- Sun Pharmaceutical: $4.5 billion
- Aspen Pharmacare Holdings: $3 billion
- Pfizer (former Hospira): $2.6 billion
- Sanofi: $2.5 billion
- Fresenius: $2.4 billion
- Lupin: $2.2 billion
- Dr. Reddy's Laboratories: $2 billion
After the dust has settled on the Allergan transactions, Teva Pharmaceutical will widen its lead in generics, potentially doubling annual worldwide sales even after making several smaller divestitures required for regulatory approval, to as as high as a 22% to 23% market share. Mylan also will move up on the list, due largely to last year's addition of Meda assets.
Also making an appearance on the list is Pfizer, and along with Novartis and Sanofi, it represents a growing presence by big pharma in the generics market, after an era when large companies were divesting their generic businesses.
In addition to big moves by Mylan and Teva Pharmaceutical, here are some up-and-coming stocks that are seeking to crack the top 10, or at least the top 20, (about $1 billion in annual generic revenue) in the near future:
1. Dr. Reddy's Laboratories (RDY - Get Report)
This company also benefited from the Teva Pharmaceutical/Actavis deal, acquiring a portfolio of one approved ANDA, one ANDA with tentative approval and six ANDAs pending approval, altogether representing branded versions of these products with combined annual revenue of about $3.5 billion.
When marketed, these new generics could bring Dr. Reddy's Laboratories further up the top 10 list of generic providers worldwide.
2. Endo Pharmaceuticals Holdings (ENDP - Get Report)
This company has been relatively quiet on the acquisition front since its September acquisition of Par, consolidating older generics lines into the latter's operating model and initiating cost-saving measures while experiencing increased competition for certain larger generics, including Voltaren gel.
On the positive side, Endo Pharmaceuticals Holdings is looking ahead to new generic approvals to get this division, its largest, back to revenue growth later this year or next, while improving cash flow and operating income. Longer term, though, Endo Pharmaceuticals Holdings has hinted at potential asset sales, and generics could be part of such a potential move, alternatively it would take only one or two purchases to push the company into the top-10 generic firms' list, over the $2 billion worldwide annual revenue mark.
3. Impax Laboratories (IPXL)
The company's $586 million recent purchase included 15 marketed generics, one more approved product and two added dosages of an existing product not yet launched, one pipeline generic and one additional dosage or another, pending Food and Drug Administration approval, and perhaps most importantly, the full commercial rights to its pending ANDA for Concerta for ADHD, which had previously been partnered with Teva Pharmaceutical.
Impax Laboratories also bolstered its generics management with the hiring of Doug Boothe, who had previously been with Perrigo and before that Allergan, so he is most likely familiar with the acquired products. Altogether, the acquired products are expected to boost Impax Laboratories' generic sales to close to the $1 billion annual revenue mark, perhaps by next year.
The combination will add a higher profile of U.S. generic products to Nichi-Iko, including some just recently purchased by Sagent Pharmaceuticals from Teva Pharmaceutical/Actavis, while giving Sagent Pharmaceuticals access to Nichi-Iko's biosimilar expertise and other advanced manufacturing systems. Sagent Pharmaceuticals will keep its Chicago-area operations intact following the merger.
5. Mayne Pharma (MAYNF)
The Australian company also participated in the Teva Pharmaceutical/Actavis sales, purchasing a U.S. portfolio of 37 generics and five in development, with about $230 million in annual revenue estimated for next year, to tuck into its U.S.-based generic operations in Greenville, N.C.
This will push Mayne Pharma into a top-25 U.S. generics position, one particularly strong in the oral contraceptive/hormone therapy market.