Teva to buy Allergan's generics biz for $40.5bn

By Dan Stanton

- Last updated on GMT

Teva has struck a mega-deal to buy Allergan's generics wing, after months of pusuing Mylan,
Teva has struck a mega-deal to buy Allergan's generics wing, after months of pusuing Mylan,
Teva has struck a deal to buy Allergan’s generics business a week after its persistent attempts to acquire Mylan fell through.

The deal, valued at $40.5bn (€36.5bn), will see the Israeli pharma firm acquire the generics arm of Allergan – formerly known as Actavis – in what has ended months of bidding and speculation in the sector.

“This transaction delivers on Teva’s strategic objectives in both generics and specialty,”​ said Teva CEO Erez Vigodman. "Through our acquisition of Allergan Generics, we will establish a strong foundation for long-term, sustainable growth, anchored by leading generics capabilities and a world-class late-stage pipeline that will accelerate our ability to build an exceptional portfolio of products – both in generics and specialty as well as the intersection of the two."

While it is too early to know how the deal will affect business, Teva expects the deal to achieve cost savings of around $1.4bn, coming from efficiencies in operations, G&A, manufacturing, and sales and marketing.

Mylan merger withdrawn

In April, Teva had a $40bn mega-merger bid rebuffed by Mylan​, which was pursuing its own M&A strategy with a $29bn bid for Perrigo. While back-and-forth correspondence grew ugly between the two firms​, Teva was continued to pursue a hostile takeover through the acquisition of a number of Mylan shares​.

But last week Stichting, an independent foundation owned by Mylan, exercised a call option to acquire almost 500 million shares in the company, effectively extinguishing Teva’s takeover bid, and today the Israeli Generics Giant announced it has withdrawn its cash and stock proposal for Mylan:

"We continue to believe that a combination of Teva and Mylan would have made sense for our companies, our respective stockholders and the healthcare industry as a whole,"​ Vigodman said.

"However, despite our clear commitment to consummating a transaction, and our conviction that we ultimately would have succeeded in acquiring Mylan, we believe we have an even greater opportunity to create compelling, sustainable value for Teva’s stockholders through our transaction with Allergan.​"

Rumours of the Teva-Allergan deal broke this weekend, and were welcomed by investors. A survey taken by Evercore ISI’s Umer Raffat found over 79% of respondents supported the prospect of such a merger, compared to just 38% who supported a Teva-Mylan deal.

Allergan buys Naurex

With the sale of its generics wing, Allergan is set to focus on its branded business and set the wheels in motion yesterday with a $560m offer to buy mental health drug developer Naurex.

Illinois-based biotech Naurex’s lead product is rapastinel (GLYX-13), a targeted modulators of the N-methyl-D-aspartate (NMDA) receptor currently in Phase III trials for depression, while the firm is also investigating an orally bioavailable version in Phase I studies.

“The acquisition of Naurex is a great fit for Allergan and a compelling and exciting investment,”​ said Allergan CEO Brent Saunders.

“Naurex's unique pipeline comprises compounds that utilize a new mechanism to target areas of significant unmet medical need in Major Depressive Disorder (MDD), including severe and/or treatment-resistant depression. These highly differentiated compounds will immediately bolster our exceptional mental health pipeline.”

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