As generic competitors were swallowed up, Teva survived, and led the pack with some of the largest deals. Teva's $3.4 billion
acquisition of Sicor in 2004 gave it an important new resource, the ability to manufacture specialty injectables—generic biologics.
The recent $7.4 billion acquisition of Ivax made Teva the 16th-largest pharma company by prescription drug sales, and the
largest by prescription drug volume.
But it's not just size that matters. Teva has an admirable track record of managing mergers so they create value—a rarity
in pharma. (See "A History of Successful Integrations,".) "Our expertise in acquisition and integration of companies is unique
not only in our industry," says Makov. "I don't know any other company where its two largest acquisitions became accretive
in the second quarter."
Hire Lawyers.A Lot ofLawyers
At innovator companies, execs dream of drugs that sail through clinical trials with stunning effectiveness and safety. Executives at generic companies
probably dream about lawsuits. Under the Hatch Waxman Act, the first company to file an ANDA and a "Paragraph IV" patent challenge
(named for the relevant section of Hatch-Waxman) wins 180 days of market exclusivity. This legal maneuver is Teva's bread
and butter. "Teva is the most prolific—and most successful—of all companies when it comes to Paragraph IV filings," says Gregory
Glass, editor of the Paragraph Four Report, which tracks these filings. "They're really head and shoulders above everyone else."
The company spends serious money on lawyers. "Teva's legal department is big," says Makov with a laugh. "We have many, many
top-notch lawyers that work for us around the country. What do you think? That Pfizer puts against us the low-key lawyers?"
Paragraph IV: An Ever-Present Challenge
Only FDA knows how many of Teva's Paragraph IV challenges have succeeded, and FDA isn't talking. Teva reports that over the
last four years, it has won eight cases, settled another eight, and lost two, although this count includes only court decisions
that cannot be appealed. Teva says it is currently engaged in 50 patent challenges. Other numbers offer a different view.
"Despite considerable success in the past in invalidating patents on key products—such as Merck's Fosamax—Teva has lost almost
as many court cases as it has won," says Alasdair Milton, Wood Mackenzie's senior life sciences analyst. Milton's research
says that, as of February 2006, Teva filed 160 ANDAs with FDA, 88 of which were Paragraph IV applications. Teva claims it
was first to file a Paragraph IV challenge on 46 applications, all of which would win six months of market exclusivity if
"Teva knows how to play the numbers game," says Joseph O'Malley, a lawyer at Fitzpatrick Cella Harper & Scinto and lead trial
counsel for Pfizer in its case to stop Teva and Ranbaxy from selling Accupril (quinapril). "If you file enough challenges,
you'll diversify your risk enough that it will only take a few successes to make you profitable," says O'Malley. "Between
filing your ANDA and your legal fees, the risk is only about $10 million. And if it wins that case, it can catch 80 percent
of the innovators' market—sometimes within two months."
The conventional wisdom holds that generic companies are quicker and slyer in the courtroom than innovator companies. But
Big Pharma is fighting back. Take the case with Zocor, which Makov refers to, almost affectionately, as "simva."