Teva expects to double its R&D capabilities with the acquisition of Barr, executives from both firms said during a July 21 luncheon in New York.

William Marth, CEO of Teva North America, said the acquisition would also enable the company to increase its production capacity by 25 percent. Barr has six manufacturing facilities, one active pharmaceutical ingredient manufacturing plant, which is in Croatia, and four R&D centers.

The briefing was held three days after Israel's Teva announced its deal to buy Barr for $7.46 billion (¹ Also see "Generic Drugs Don’t Come Cheap: Teva Buys Barr For $7.46 Billion" - Pink Sheet, 21 July, 2008. p. 6).

Overall, Barr will help fill out Teva's research and production facilities (see chart: "² Teva Acquires Barr, Emphasis On The Laboratories").

Marth said with the acquisition Teva would have approximately 70 first-to-file Paragraph IV challenges to brand-name patents pending before FDA. Barr has been first-to-file or pursued shared exclusivity in 19 of these cases.

At-Risk Launches Made Easier

During a call after the deal was announced someone suggested that Teva would be better positioned to pursue at-risk launches. In a phone interview CEO Bruce Downey said he was not sure that was true but by having a bigger balance sheet Teva could better afford to take the risk.

He said he has always thought an at-risk launch strengthened the generic firm's case in court.

Teva has pursued several such launches, most notably with generic versions of Pfizer's Neurontin (gabapentin) in 2004, Sanofi-Aventis' Allegra (fexofenadine) in 2005 and Novartis's Lotrel ( amlodipine besylate/benazepril) , Novartis' Famivir (famciclovir) and Wyeth's Protonix (pantoprazole) in 2007.

Marth also said the acquisition would advance Teva's efforts in biogenerics, doubling the number of scientists devoted to the field and doubling the number of biogenerics in development. Barr has four biogenerics in the development phase, only one of which it has revealed, a generic of Amgen's Neupogen (filgrastim) granulocyte-colony stimulating factor. Downey said Barr has one or two additional products in the research phase.

During Q&A at the luncheon, Downey was asked if Barr had ever pursued development of a generic version of Teva's multiple sclerosis drug Copaxone (glatiramer). Downey said Barr had considered doing so and rejected the idea because of the complexity of the product and its patent portfolio.

Downey noted that Barr had received 12 previous offers for the company, two of which had come from Teva. In the later interview he noted that the first two offers came from Syntex and Lederle in the mid-1990s and that Teva made its first proposal about seven years ago.

Holding Hands In Europe

What made Barr agree to sell this time around? Downey said the strategy is appropriate now since both companies have interests in Europe and "together those interests are more viable and stronger" than they are alone.

In addition, he said that in the last few years Barr acquired a generics company, the Croatian-based Pliva, while Teva has purchased several, including Sicor and Ivax.

Teva also just completed acquisition of Bentley Pharmaceuticals' generic operations for approximately $360 million in cash. The company, based in Spain, had spun off its drug delivery business to stockholders.

The deal with Teva was also appealing, Downey said, because there is little overlap between the two companies and the company's offering price was better than in its previous proposals.

But letting go of Barr isn't easy. Downey, who joined the company in 1993, said it would not be his first choice but his obligation is first to shareholders and then to employees. On balance, he said, their interests were better served by the sale.

Putting the "two best companies in the sector together creates a new organization with maximum opportunities to prosper and grow," Downey said. "I recommended that we do it."

Downey will not be staying on with the combined firm, and the merger solves in a way the succession question Barr had after President and Chief Operating Officer Paul Bisaro left the company last summer to head up Watson.

Christine A. Mundkur, who joined Barr in 1993 as an associate counsel, became CEO of Barr Labs in March (³ Also see "Barr Shifts Roles At The Top, Splits Up Senior Management Duties" - Pink Sheet, 28 March, 2008.).

A Teva spokesperson said it is too early to tell whether there will be any layoffs or consolidation of facilities. Until the regulatory and legal issues are finalized Teva does not have access to all of Barr's business information.

- Brenda Sandburg (b.sandburg@elsevier.com)

Teva’s Acquisition Of Barr Will Boost Research For Molecules Large And Small

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