Sector Snap: Teva-Barr talk lifts generics makers

Citing market sources, Israeli newspaper Globes said Teva is in talks to buy Barr for $7.5 billion, or a premium of about 50 percent to its closing price on Wednesday.

Barr stock jumped $10.96, or 23.4 percent, to $57.78, and hit a new high of $58.40. More than 16 million shares changed hands by 3 p.m., compared with an average daily volume of about 1.7 million. Teva shares declined $1.52, or 3.6 percent, to $40.90.

Barr declined to comment on the reports, describing them as rumors and speculation; Teva said it does not comment on future activities.

Barr, which reported $608 million in revenue in the first quarter, describes itself as the No. 1 oral contraceptives maker in the U.S. Teva posted $2.57 billion in first-quarter revenue.

Analysts said the combination would make sense, although they said it was too soon to tell if the reports are accurate. Michael Tong of Wachovia said Barr is strong in Eastern and Central Europe because of its 2006 buyout of Croatian drug maker Pliva, and Teva does not have much of a presence in that region. He added that Teva has only a limited oral contraceptives business--although it may have to sell that unit to avoid an antitrust issue.

Buckingham Research analyst David Buck said the buyout would give Teva "attractive potential patent challenge opportunities," including Bayer AG's contraceptive pills Yasmin and Yaz, and exclusive launch rights to a generic version of the attention deficit hyperactivity disorder drug Adderall XR, made by Irish drug company Shire Ltd.

He said the takeover would value Barr shares at $79.50 to $82.95 per share.

If Teva buys Barr, it would continue a trend of big deals in the sector. In 2007, Mylan Inc. paid $6.6 billion for the generic business of German drug maker Merck KGaA and bought a majority stake in India's Matrix Laboratories Inc. for $736 million.

Merck KGaA has been separate from New Jersey-based Merck & Co. since the end of World War I.