While the market was panicking yesterday, Teva Pharmaceuticals
Teva now expects the deal to be accretive to earnings in the third quarter, a full quarter earlier than expected. It also expects the deal to yield cost savings of $400 million, up $100 million from initial estimates, on the $7.5 billion purchase of the former Stock Advisor pick. That looks pretty good compared to Pfizer's
The main benefit from Teva buying the American company probably won't even come from the U.S., but from Europe. Barr has a presence there through its acquisition of Pliva a few years ago, which should help Teva expand its worldwide dominance. Generic drugs are a low-margin business, so spreading out development and manufacturing costs over a higher volume should help Teva compete on price against other large generic-drug companies like the Sandoz subsidiary of Novartis
The other benefit will come from Barr's women's health drugs, many of which are branded products that sport higher margins. They'll be a nice addition to Teva's own branded multiple sclerosis drug, Copaxone, which saw sales jump 32% last year. It continues to compete well against other multiple sclerosis drugs, like Biogen Idec's
Generic drugs are likely to be a major solution that governments use to tackle the problem of rising health-care costs, and the new, larger Teva looks well-poised to grab that growth as it happens.
Our Foolishness is far from generic:
- The death of fundamental analysis.
- These companies will get better in a recession.
- The next three dividend dynamos.
