Barr shares rise on Bayer birth control pills deal

In midday trading, Barr shares rose $1.83, or 4.5 percent, to $42.77.

Beginning July 1 at the latest, Barr will begin selling a generic version of Yasmin. And on July 1, 2011, Barr will launch a generic of Yaz. For both products, Bayer will supply the generic pills to Barr who will in turn give part of the revenue to Bayer.

In March a New Jersey federal court decision invalidating a key Yasmin patent opened the door for a Yasmin generic to launch earlier than expected. While Bayer said it will continue to appeal the decision, even if the German company is successful Barr will still sell the generics, but will pay a higher revenue percentage to Bayer.

Bernstein analyst Aaron Gal wrote in a note to clients that the agreement further benefits Barr as it maintains a 30-month stay against other Yasmin generic filers. This keeps Watson Pharmaceuticals Inc. and Novartis AG's Sandoz division from launching generic Yasmin until the stay expires in late 2010.

He maintained his "Outperform" rating and $50 price.

In the next few years, Barr could also see upside from potential additional generic launches, according to Cowen & Co.'s Ken Cacciatore. He noted that Barr will launch a generic of Shire PLC's attention deficit hyperactivity disorder drug Adderall XR in April 2009 with six months of market exclusivity. In addition, the company could reach settlements to launch generic versions of birth control pill Ortho Tri-Cyclen Lo, restless legs syndrome drug Mirapex and allergy drugs Nasacort and Allegra D.

Goldman Sachs' Randall Stanicky said the settlement is part of a theme in the generics industry which serves to provide clarity on future sales, minimize risk and eliminate near-term earnings surges that "at-risk" launches, or generic launches without expiration of patents or an agreement, provide.