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Drug Maker Teva to Buy Sicor

Purchasing the Irvine company would give the Israeli generics firm an entry into biotech.

November 01, 2003|Jerry Hirsch | Times Staff Writer

In a bid to boost sales of its generic drugs to U.S. hospitals, Israel's Teva Pharmaceutical Industries Ltd. said Friday that it would buy Irvine-based pharmaceuticals maker Sicor Inc. for $3.4 billion.

The cash-and-stock acquisition would be among the largest ever for an Israeli company and would give the world's biggest seller of generic medicines an avenue into the promising world of biotechnology drugs.

"The biotech corporation that we have now in Sicor will be very, very important in the future," said Israel Makov, Teva's chief executive, in a conference call with Wall Street analysts. He added that Teva might seek to acquire another biotech company.

Biotech drugs are derived from naturally occurring proteins in living organisms, and Sicor is one of several companies pushing development of generic versions of this lucrative class of medications.

Conventional pharmaceuticals are derived from chemical compounds and typically are easier to duplicate in generic form.

"Generic biologics are going to make this deal interesting in the longer term, but we are still talking about something that is three to four years out," said Ian Sanderson, an analyst with SG Cowen Securities in Boston.

In the near term, the big attraction for Teva and Sicor is how well their product lines complement each other, Sanderson said.

Teva, which means "nature" in Hebrew, makes the multiple sclerosis treatment Copaxone as well as generic versions of numerous antibiotics and other medicines, including the antidepressant Prozac and Mevacor, a cholesterol drug.

One area where Teva is not a leader is the injectable drug business. Sicor, which resulted from the 1997 merger of Gensia Inc. and Swiss company Rakepoll Holding, makes many generic versions of injectable medicines, including chemotherapy drugs and general anesthetics used in hospitals.

Makov said that was one of Sicor's main draws, noting that Teva "actually sells very little in hospitals." He also said that through Sicor, Teva would have entree at hospitals for its oral generic drugs.

"We have been seeking the right acquisition opportunity in this field for quite some time, and Sicor is the prize for our patience," Makov said.

Likewise, the merger would allow Sicor to use Teva's expertise in generic antibiotics to shore up the only area of the injectable drug market where it currently is lacking, Sanderson said.

Sicor has about 2,000 employees in the U.S., Mexico and Europe, including 800 in Orange County.

The companies did not say whether layoffs would occur but said no plants would be closed.

The merger agreement calls for Teva to pay $16.50 in cash and 0.1906 of an American depositary receipt at Thursday's closing price for each share of Sicor stock, or about $27.50.

At the completion of the deal, Sicor shareholders would own about 7.5% of Teva.

The deal must clear regulatory hurdles and receive shareholder approval but is expected to be completed early next year.

Petah Tikva-based Teva traces its roots to the 1930s. Scientists who were refugees from Nazi Germany helped transform the company from a drug distributor into a pharmaceuticals maker. It became a public company in 1951, three years after Israel was established.

Today, close to 90% of Teva's sales are in North America and Europe. The company will report third-quarter earnings Monday.

For the first six months of the year, Teva posted a profit of $275 million on sales of $1.52 billion.

Sicor earned $83.3 million on sales of $405 million for the first nine months of the year.

Sicor shares rose $1.81, or 7.3%, to $26.78 on Nasdaq after the deal was announced. Teva's ADRs fell 79 cents to $56.92, also on Nasdaq. They have risen 47% this year.

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