N. American pharma buys drive up M&A prices

European drugmakers have more competition for nearby buyouts these days. With North America's pharma companies turning to international markets for growth, they're scouting Central Europe, Eastern Europe, Turkey and the Middle East for potential generics deals. That's likely to push prices upward, experts tell Dow Jones.

In the recent past, most Central European pharma deals went to a European drugmaker or an Indian company, investment bankers are saying. Now, the North Americans are swooping in. Witness Canadian drugmaker Valeant Pharmaceuticals' buyout of Lithuania's AB Sanitas, or U.S.-based Watson Pharmaceutials' purchase of Greece's Specifar.

As Dow Jones points out, not only were the winning bidders for these deals North American, but the entire bidding pool was also dominated by North American companies. That trend hasn't gone unnoticed in the M&A community; UBS has identified 17 pharma companies in "local" emerging markets that could fit the bill for these deal-hungry foreigners. They include Hungary's Gedeon Richter, Dow Jones says, and Hikma Pharmaceuticals of Jordan.

However, there is a problem. There aren't that many midsized generics firms to go around in those regions. Jeffries' Tommy Erdai, who advised Watson during the Specifar takeover, says there's now a "scarcity premium"--and it will only grow as consolidation continues.

- read the Dow Jones story