According to people familiar with the matter, Teva is considering making a bid to acquire Mylan and has contacted advisors about a possible takeover, Bloomberg reported Friday. The sources said Teva had not yet made a formal approach, but that Mylan is aware of the drugmaker's interest. The speculation follows Mylan's recent non-binding unsolicited offer to acquire Perrigo for $205 per share in cash and stock, or a total of about $28.9 billion.
People familiar with the issue cautioned that Teva's deliberations are not guaranteed to result in an offer. Commenting on the rumour, Mylan executive chairman Robert Coury said "we have studied the potential combination of Mylan and Teva for some time and we believe it is clear that such a combination is without sound industrial logic or cultural fit." He further noted that "there would be significant overlap in the companies' businesses," making it "unlikely that any such combination could obtain antitrust regulatory clearances."
Coury added that Mylan is "fully committed to its stand-alone strategy," but that the company's board would "carefully consider" an offer from any party if one arises. "We do not intend to comment further on media speculation and will maintain our unwavering focus on executing on our business plan and concluding a successful transaction with Perrigo," he stated.
Commenting on the news, Cowen Group analyst Ken Cacciatore remarked that Teva "should make the aggressive, wise, and value-creating decision to move on Mylan." US regulators recently approved Novartis and Momenta Pharmaceuticals' generic version of Teva's Copaxone (glatiramer acetate), while the Israeli drugmaker is moving to have patients switch to its thrice-weekly formulation of the multiple sclerosis therapy, which the FDA cleared last year. Cacciatore suggested Teva will have to find ways to cut expenses in order to maintain annual earnings of about $5 per share as it waits for pipeline drugs to contribute to profit, while a Mylan buyout, which he estimates would yield synergies worth $2 billion, could boost profit immediately.
For related analysis, see ViewPoints: Approval of generic Copaxone will sharpen focus on Teva's M&A efforts.
David Steinberg, an analyst for Jefferies Group, commented that "financially, there's a very strong motive to pursue this kind of acquisition because it would be highly accretive to earnings." However, from a strategic point of view "there are some pluses and some minuses," he said, noting that while a major transaction such as Mylan could help Teva become less reliant on Copaxone, it would not ensure long-term growth the way buying a "higher-margin, longer-duration proprietary" drug would. Steinberg suggested Teva might consider pursuing both a large takeover like Mylan to increase earnings over the short term, and then a smaller acquisition similar to its recent $3.2-billion deal for Auspex Pharmaceuticals to help improve its stock-price multiple over time.
Speculation of Teva's interest in Mylan surfaced last month, and some analysts have suggested Mylan's offer for Perrigo could be a defensive move to prevent a takeover. Mylan relocated its domicile to the Netherlands as part of its $5.3-billion purchase of Abbott's developed-markets branded generics business last year, and earlier this month set up a mechanism under Dutch securities law that could render a takeover more difficult. Analysts at JP Morgan estimated that a merger between Teva and Mylan could generate cost savings in excess of $1 billion annually.
For related analysis, see ViewPoints: Mylan begins courting Perrigo – is offence its best defence against Teva?, as well as ViewPoints: Will an eagle-eyed Teva be back on the M&A trail soon? and ViewPoints: Auspex deal looks solid, but Teva investors want more sizzle.
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