Endo Pharmaceutical P.L.C. said Monday that it will pay $8.05 billion for privately held Par Pharmaceutical Holdings L.L.C., to strengthen its position on the shifting landscape of generic drugmakers.
The stock-and-cash sale comes amid consolidation in the market for generic drugs, as companies strive for greater leverage and profit, while patients and payers complain of rising prices. Some of the large generic drugmakers also sell so-called branded drugs, which usually carry higher prices because they are protected from market competition by patents.
In October, Endo added to its branded portfolio by paying $2.6 billion for Chesterbrook-based Auxilium Pharmaceuticals.
The consolidation is at all price levels. Also on Monday, Philadelphia-based generic drugmaker Lannett Co. Inc., said it bought privately held Silarx Pharmaceuticals for $42 million in cash.
Big or small, branded or generic, drugmakers are increasingly facing push-back on the prices of many drugs they used to set without flinching. Some pressure comes from pharmaceutical benefit managers, which are for-profit companies that manage drug plans for employers and insurers. PBMs negotiate prices and decide which drugs are available to consumers on insurance company formularies.
"It takes a long time for Teva, Lannett or any of the generics companies to get a new branded product into the market, adding to their revenues," said University of Michigan business professor Erik Gordon, who follows the pharmaceutical business. "The quickest way to boost revenues is to buy another company and its revenues. In generics, size matters because you can win more bids with large pharmaceutical benefits managers and other big buyers of pills. Adding revenues of $2 to revenues of $4 can end up producing $8 of revenue."
Governments are also applying pressure, either on behalf of patients or for taxpayers, who fund programs such as Medicare and Medicaid. U.S. Sen. Bernie Sanders (I., Vt.), who is running for president, and Rep. Elijah E. Cummings (D., Md.) on Monday introduced legislation "to curb skyrocketing prices of generic drugs," they said in a statement.
In March, Sun Pharmaceuticals completed the $3.2 billion acquisition of Ranbaxy. Both companies were based in India, and have U.S. operations in Pennsylvania and New Jersey. The combination created the fifth largest generic manufacturer by revenue, Sun said at the time. However, Endo now claims that spot with the addition of Par revenue.
Meanwhile, Teva Pharmaceutical Industries Ltd., which remains the world leader in generic drug revenue, is trying to buy Mylan, but Mylan has rejected Teva's $40 billion offer. Over the weekend came the news that one of Teva's larger shareholders, billionaire George Soros, had liquated the Teva stake held by Soros Fund Management.
Based in Israel, Teva has its Americas headquarters in North Wales, Montgomery County, and has other facilities in the region. Mylan is registered in the Netherlands after buying a foreign company to pay lower U.S. corporate taxes, but operates from Canonsburg, outside Pittsburgh.
Endo made a similar move. Its executives operate from Malvern, Montgomery County, but it is officially headquartered in Dublin after acquiring a company with Irish registration. Par operates from Woodcliff Lake, N.J.
According to Endo's statement, Par's owner will receive about 18 million shares of Endo stock, which Endo says is worth $1.55 billion based on the 10-day volume weighted average, and $6.50 billion in cash, some of which will go to pay Par debts. Endo hopes to close the transaction in the second half of 2015.
Endo chief executive Rajiv De Silva said that his generics division, Qualitest, remains "an extremely attractive and effective growth driver," and that Par's more profitable "gross margin products" will help generate more revenue - and position Endo for more acquisitions.
As for Lannett, which has three Philadelphia facilities, the Silarx acquisition means another factory in Carmel, N.Y., and "an exciting pipeline and a number of complementary products," according to CEO Arthur Bedrosian.
Lannett has 400 employees, including 285 in Philadelphia, and would add 50 at the facility in New York. Bedrosian said in his statement that there would be no plant closings or layoffs.