Actavis Targets Generics Rival Pliva

Takeover activity in the generic drug industry is reaching fever pitch as companies jockey for position in a highly competitive market. In the most recent consolidation move, Iceland-based Actavis has made an unsolicited bid for the Croatian generic drug firm Pliva.

If successful, the $1.6 billion deal would make Actavis the third-largest generic company in the world. "Croatia would become the hub for Central and Eastern Europe and a key center for future R&D and manufacturing, providing significant support for all of our other international markets," says Actavis President and CEO Robert Wessman.

Actavis has offered Pliva 570 Croatian kunas per share (about $94), which Actavis says is a 35% premium over Pliva???s average share price over the past three months. However, Pliva points out that the bid is a mere 12% above its closing price on March 16 and says the deal would undervalue the progress it has made in improving its profitability.

Pliva, once highly dependent on its license of the antibiotic Zithromax to Pfizer, has struggled since the drug lost patent protection in the U.S. The company recently sold its proprietary drug R&D operations to GlaxoSmithKline, and has been working to consolidate its manufacturing network.

The proposed acquisition of Pliva builds on an aggressive push by Actavis to become a leader in the global generic drug industry. In 1999, Actavis was entirely focused on the Icelandic market and had annual sales of roughly $70 million. Over the subsequent five years, the company expanded its sales to about $550 million with a series of acquisitions, primarily in Eastern Europe.

Last year, the company picked up the pace, acquiring New Jersey-based Amide Pharmaceuticals for $500 million, and paying $810 million for the human generics business of Alpharma, another New Jersey company. With the two additions, Actavis expects revenues in 2006 to reach $1.6 billion. Both deals significantly bolstered the company???s position in the critical U.S. drug market.

Actavis is vying for a top spot in generic drugs at a time when razor-thin margins and tough competition are driving consolidation in the U.S. Just last week, Watson Pharmaceuticals agreed to pay $1.9 billion for Andrx Corp. in a deal the companies say will create the third largest generics firm in the U.S., based on prescriptions.