Barr to Pharma: 'Watch Out'

Barr Laboratories is poised to become the world's third-largest generics maker, and its chief executive says the company will waste no time going after brand name patents.

The Woodcliff Lake, NJ-based company emerged victorious in a bidding war to acquire Croatian generics maker Pliva for $2.5 billion. Its bid trumped that of Icelandic company Actavis.

The deal gives Barr access to European markets, low-cost manufacturing operations in Croatia and Poland, and new drug-formulation technology. In addition, the acquisition adds injections, creams, and ointments to Barr's portfolio, and might speed its entry into the biogenerics market.

Having access to injectable and transdermal drug-delivery technologies "expands in the US our patent challenge opportunities," Barr chairman and CEO Bruce Downey told investors. "We expect to be very active in that particular part of the US generics business."

Drug delivery is the fastest growing segment of the pharmaceutical industry, with more than $25 billion in sales, and growing about 15 percent annually, according to business intelligence firm Global Information. Injectables account for 15 percent of that market.

Biotech products have been driving much of that growth. And while FDA is still grappling with how to assess the equivalence of bio-similar products, Barr plans to use Pliva's R&D platform to mount some of first regulatory challenges in this area.

Already, Pliva and Barr have been collaborating on a biogeneric product for Amgen's Neupogen (filgrastim)--a partnership that began in March 2005 and was the impetus for the acquisition. The merger also adds to Barr's pipeline a biogeneric for EPO that would compete with Amgen's Epogen and Johnson & Johnson's Procrit.

Downey said Barr plans to "leap forward" into biogenerics and become a "global competitor in an emerging area."

In addition to technology, the deal gives Barr--which now ranks just behind Novartis and Teva in size--the financial strength to face the inevitable legal and regulatory hurdles. "Barr is [already] a substantial player, and they're very aggressive," said Ed Thwaite, president of generics consulting firm EW Thwaite Associates. With Pliva on board, the company "will have a meaningful way to move into biogenerics."

The deal will afford Barr about $2.4 billion in generic and proprietary revenue, and an annual R&D budget of $200 million, according to Downey. Post-merger, the company will have 120 generic products in the US and 550 in Europe. It also has 50 products pending FDA approval, and 220 additional projects in development.

The Federal Trade Commission has approved the deal, pending Barr's divestiture of overlapping product lines, the company announced Friday.

The new company will have three business units: Barr, the United States generics business; Duramed, its proprietary products division; and Pliva, its international arm.