Teva Pharmaceuticals (TEVA, Financial) and Mylan Inc. (MYL, Financial) are both the greatest of rivals in the world dominated by generic drugs. In the beginning of April, Mylan Inc. had placed a bid of $28.9 billion to acquire Perigo Co. (PRGO, Financial). Within two weeks of such an announcement, it rival Teva has placed a counter-bid to acquire it and become the largest generic company in the World. Though there is information that Mylan has initially disposed the bid stating cultural differences between the two generic companies, Teva remains confident of acquiring its immediate contender shortly. Let’s get to the facts of the story and decipher how this acquisition would benefit the two companies in the long run.
The deal details
The Isreali pharmaceutical company, Teva, disclosed this Tuesday that it has placed a bid of offering $82-a-share offer to Mylan shareholders. Teva has launched a $40 billion bid for Mylan, which could be the biggest health-care deal proposed so far this year. The acquirer is ready to offer a 50:50 combination of stock and cash to Mylan’s shareholders.
In fact, analysts have estimated that if this acquisition takes final shape it would create the world’s largest generic drug company with more than $30 billion in sales from 145 countries. It is to be noted that both these companies share a popular branded product- the EpiPen allergic-reaction treatment drug of Mylan and the multiple sclerosis drug of Teva, Copaxone. In fact, Teva’s drug would get more prominence in the generic market once the acquisition enters the completion phase.
Benefitting Teva in the long run
Teva officials believe that Mylan is a natural fit for them and the combined entity would help in managing costs better in the low-margin generics business. It has emphasized that this acquisition would boost its ability to develop low-priced copies of biotech drugs, a new market which presently has immense growth potential.
It has even stated such a combined entity would lead to cost and tax savings of around $2 billion annually in the long run. However, it did not explain how the tax savings would be achieved, though both the companies are operational in lower-tax jurisdictions.
In the quest for generating more revenue, amid pricing pressure from cash-strapped governments and insurers, both companies coming together and sharing a common product portfolio might aid in tackling competitors in the best way possible.
The tussle remains
Though this deal means a lot to Teva, pulling off the strings would not be an easy affair as Mylan has already clearly opposed such a hostile move. After Wall Street Journal first reported last week that Teva was considering a bid for Mylan, the latter issued an immediate statement concluding that the combination would lack “sound industrial logic and cultural fit” and would not be approved by the antitrust regulators. But Mylan remains positive on winning this battle and is ready to dispose the overlapping products to gain antitrust approval. It remains to be seen if the acquisition finally takes shape in the pursuant months which would create the largest company in terms of generic drug sales in the pharmaceutical industry.
