Teva Said to Be Close to Buying Generic Drug Unit of Allergan

26 Jul 2015 | Author: | No comments yet »

Teva Said in Talks to Buy Allergan’s Generic-Drug Business.

Teva Pharmaceuticals is in advanced talks to buy the generic drug division of Allergan for about $45 billion, a person briefed on the matter said on Saturday.

Teva Pharmaceutical Industries Ltd (TEVA.TA) is in superior talks to purchase Allergan Plc’s (AGN.N) generic drug enterprise following a to date unsuccessful effort to accumulate peer Mylan NV (MYL.O), in accordance with an individual acquainted with the matter. Should an agreement be reached, it would be the latest huge deal in a wave of mergers within the health care space, a spree that has ranged from drug makers to insurance providers. The Allergan unit would be spun off and combined with Teva—already the world’s biggest seller of generic medicines with a market value of $60 billion—one of the people said. Jerusalem-based Teva, which has provided to purchase Mylan for $40 billion, is now near an settlement to accumulate Dublin-based Allergan’s generic drugs unit for between $40 billion and $45 billion, the individual stated on Saturday. Companies of all stripes are scrambling for tie-ups following the Supreme Court’s decision last month that upheld the 2010 Affordable Care Act health-care overhaul.

For Allergan, selling the generic drugs business would be a change of course for the company, which had built itself into a $124 billion powerhouse in large part through repeated deals, for companies like Forest Laboratories. For Teva, a deal with Allergan would largely give the company what it has been seeking from a Mylan deal: increased scale in the hotly competitive generic-drug market, and an opportunity to pursue further cost reductions that could help it cope with razor-thin margins on the low-priced medicines. Large drug makers try to realign their operations to give attention to a small variety of main companies, whereas smaller specialty and generic producers are in search of bigger scale. The current Allergan itself was born from the combination of Actavis, a generic drugs maker, and Allergan, then best known for being the maker of Botox. Teva is under pressure because its top selling product, a brand-name multiple-sclerosis treatment called Copaxone, started facing lower-priced competition in the U.S. last month.

The timing may be right for Allergan to consider a sale of its generics business, said Elizabeth Krutoholow, an analyst at Bloomberg Intelligence in New York. “They may be able to command a significant premium given the recent interest in the sector,” Krutoholow said in an e-mail on Saturday before the talks were disclosed. The old Allergan had been seeking to fend off an unwanted takeover bid by Valeant Pharmaceuticals, an aggressive serial acquirer that had partnered with the hedge fund magnate William A. The $70 billion-a-year generic-drugs business isn’t growing like it had been, now that most of the big patent expirations for blockbuster brand-name drugs such as cholesterol fighter Lipitor have passed.

With profit margins on branded products as much as 80 percent, compared with about 50 percent for generics, Allergan Chief Executive Officer Brent Saunders may favor focusing growth on premium drugs. “With Saunders in charge, the company may lean more” to branded drugs “since that is his area of expertise,” Krutoholow said. “It’s a more attractive growth area for the company.” Allergan makes the blockbuster wrinkle treatment Botox. Among the reasons Actavis could pay so much more was that it had moved its corporate home abroad, to Dublin, meaning it pays lower taxes on its international sales. Actavis was renamed Allergan earlier this year, after doing $100 billion in deals last year that gave it brand-name drugs, notably wrinkle fighter Botox.

Actavis Plc agreed to buy Allergan for $66 billion in November 2014, after spending months locked in bitter conflict with Valeant Pharmaceuticals International Inc., a rival drugmaker that had started a hostile takeover effort that year. The present-day Allergan and Teva share one common thread: The head of Teva’s global generic medicines unit, Sigurdur Olafsson, worked at Actavis until last year. Allergan’s 1,000 low-priced products include branded generic drugs, over-the-counter medicines and generic versions of well-known brand names such as the OxyContin pain treatment and the Concerta attention-deficit-hyperactivity-disorder drug, according to the company website. Should shareholders react positively to any deal announcement between the companies—as they have in many such cases lately—among those benefiting could be Glenview Capital Management LLC.

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