Significant changes have been developing in the world of generic drugs. Two major players, Actavis - an Icelandic-based generic company owned by the former billionaire Thor Bjorgolfsson and Ratiopharm - a Germany-based generic company owned by the recently deceased Adolf Merckle are both up for sale.
The ultimate sales price will be interesting. Teva, one of the major generic companies, acquired Barr for about 2.5X sales and 12X EBITDA. Actavis would need to get close to this price to simply pay off the Deutsche Bank debt. Ratiopharm has similar challenges with the financing problems at the crumbling Merckle empire.
My bet? A deal with either Pfizer or GlaxoSmithKlein at roughly 10X EBITDA or 2.2X sales. An acquisition in this space would help these companies cost-effectively transition to generics that might allow for more profitably moving off patent expirations. More importantly, there are no financing challenges with either company.
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The comments on Actavis seem completely incorrect. It is unclear how I derived them.
ReplyDeleteThe comments on Ratiopharm were spot on. Pfizer and Teva engaged in a bidding war. However, Pfizer was unwilling to go over the 10x ebitda level, while Teva paid 12X ebitda, which also equalled 2.2X sales.