The estimates are Teva will purchase the generic drug division of Ivax, and will jointly acquire the company's proprietary drugs division with Merck & Co (NYSE:MRK).
Ivax leapt 11% on turnover double its daily average during Wednesday trading. Teva, on the other hand, is losing 2.5% on average turnover. Teva's response to the news was that the company does not comment to rumors and speculation, and that it reports its decisions in an orderly fashion.
One of the reasons Teva sees potential in Ivax is that in the last six months the share crashed by 50% and now has a $4 billion market cap, thus achieving the worst yield of all the pharmaceutical AMEX index shares. The company may also accrue losses due to its exposure to the Latin American market, particularly due to the crisis in Argentina.
Ivax distributes Paclitaxel, the generic drug replacing Bristol Myers Squibb's chest, lung and ovarian cancer treatment, Taxol. In September the company announced sales of the Paclitaxel were dawdling, due to the increasing competition from other drug manufacturers.
Ivax's appeal to Teva is clear: the company has 470 registered patents in the U.S. and beyond, and another several hundred patents pending. In the first nine months of this year Ivax revenues jumped 60% to $883.7 million, and its net profit excluding one-time expenses totaled $90.1 million.
At the end of Q3 2001 Teva had $814.3 million in its till, including short-term investments. Teva has through the years proved its method of achieving growth was making acquisitions, which reduce its costs and have so far been responsible for half its achieved growth.
In November Teva announced it was reneging on its decision to acquire the injectibles division of the Australian Faulding. After a failed due diligence test, Teva decided not to spend the $365 million it had allocated for the purchase.
With the Faulding deal cancelled, estimates of Teva considering other acquisitions grew prevalent.