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May marks the 50th anniversary of the sexual revolution sparked by a little white tablet known as the Pill. The U.S. Food & Drug Administration approved it in 1960, and the next year, German giant Bayer introduced it in Europe. Bayer profited handsomely in the ensuing decades, tweaking its contraceptive formula and extending its patents. Even in 2009—with the global contraceptive market awash in cheap generics—the company pulled in about $1.7 billion on its branded birth control pills, Yaz and Yasmin.
Now, Bayer faces competition of a different magnitude. Teva Pharmaceutical Industries (TEVA), the Israeli generic drugmaker known for its Pac-Man-like acquisitions of smaller competitors, aims to triple its annual sales in the category of women's health to $1 billion as early as 2012. A large portion of the $650 million Teva needs to reach that goal is likely to come from birth-control products the company acquires in future deals.
CEO Shlomo Yanai told analysts earlier this month that Teva has its eye on several targets, though he didn't name names. Frances Cloud, an independent London-based analyst who has covered the drug industry for 23 years, says Teva could be looking at the women's health divisions of U.S.-based Merck (MRK) or Abbott Laboratories (ABT). "We wouldn't rule anything out," says Bill Marth, chief executive of Teva's North American operations.
In 2008, Teva spent $7.4 billion to acquire Barr Pharmaceuticals, the top U.S. generics company, which makes Plan B, the so-called morning-after contraceptive. Last month, Teva strengthened its grip in Europe by snapping up Germany's generics leader, Ratiopharm, for just under $5 billion.
Future battles are looming in the underserved markets of the Far East. In 2007 the U.N. carried out a worldwide contraception survey of women between the ages of 15 and 49 who were married or in committed relationships. In Japan only 1% reported using the pill; in China, the percentage was so low that the data wasn't usable. Advanced Western countries presented a different picture. About 18% of American women used the Pill. The results for Germany and France were about 53% and 44%, respectively.
Bayer is still strong in women's health and aims to be a player in Asia. Including birth control, its 2009 sales in this sector topped $4 billion. In May, Bayer hopes to get U.S. approval for Qlaira, a next-generation Pill that delivers the same estrogen hormone found naturally in women's bodies. Sales could peak at about $680 million a year, says Phil Smits, head of the company's women's health unit. Not a huge number, but "we'd be foolish to walk away," he says.
With $13.9 billion in sales last year, Teva is just one-third as large as its German competitor. But in generics, a $500 million product "moves the needle" says Teva's Marth. "For us, that's attractive. For the Pfizers (PFE) of the world and the Glaxos (GSK) of the world, that's the bottom of their cutline."