Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) had an opportunity to acquire US pharmaceuticals company Perrigo Company (NYSE:PRGO; TASE:PRGO) a few months ago, and said it was not interested, sources inform "Globes." Perrigo hired bankers last summer to assess the possibility of its sale via a merger with a large pharmaceuticals company, and those bankers approached Teva and proposed that it acquire Perrigo.
The negative response was probably because Perrigo’s area of operation within the pharmaceuticals industry is different from Teva’s. Perrigo operates primarily in the over-the-counter (OTC) store-brand market, in which it is a market leader, and through which it sells drugs that are sold under the store-brands of leading retailers. While Teva does operate in the OTC market, it does not operate in store-brands. Teva’s OTC operations are carried out through a joint venture with Proctor & Gamble.
Of the two mega-deals on the table in the global pharmaceuticals market, which involve these two companies traded on the Tel Aviv Stock Exchange (TASE), only one will come to pass, if any. Teva is attempting to buy Mylan for more than $40 billion. Mylan, which has rejected Teva’s offer, is trying to buy Perrigo for more than $34 billion, and Perrigo has rejected Mylan’s offer as well.
The Teva-Mylan deal is contingent upon Mylan not acquiring Perrigo, and Teva made this fact clear when it approached Mylan.
Perrigo, under the management of Joseph C. Papa, specializes in over-the-counter drugs, and is also active in related markets. Perrigo recently completed its acquisition of Belgium’s Omega, in a $3.8 billion deal that is expected to increase its global activity. Perrigo is traded in New York and in Tel Aviv, a market it joined ten years ago when it bought Israel’s Agis Pharmaceuticals. Perrigo’s market cap is $28.3 billion.
A majority of investors are in favor of Teva
Because Teva's offer to buy Mylan is contingent upon Mylan not acquiring Perrigo, then if Mylan's acquisition of Perrigo were to go ahead, Teva would thus not buy Mylan and it can be assumed that the latter's share price would fall back down to $55 from $71.30 today. In all Teva's reports regarding the acquisition of Mylan, it stresses that Mylan's acquisition by Teva is preferable for its shareholders than Mylan's acquisition of Perrigo, and it seems that most analysts and investors agree with this viewpoint.
It has also transpired that Mylan recently raised the price of its flagship drug EpiPen, an injectable for severe allergies. According to UBS analyst Marc Goodman, Mylan put the price of the drug up 14.9% at the start of the month as well as the prices of two other treatments. EpiPen was Mylan's only drug with more than $1 billion in annual sales in 2014, helping the company to increase branded drug sales by 21% last year.
Estimates are that the branded drug, as opposed to most of Mylan's sales which are from generics, makes a central contribution to Mylan's profits. EpiPen came to Myland when it acquired Merck KGaA in 2007, beating out competition from Teva.
Teva is currently developing a generic version of EpiPen, while Mylan is developing a generic version of Copaxone, Teva's flagship branded drug. This could raise antitrust issues and any merger would likely require the sale of generic production lines for the likes of Copaxone and EpiPen.
Published by Globes [online], Israel business news - www.globes-online.com - on May 11, 2015
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