As Mylan gears up to close a $5.3 billion deal to buy a chunk of Abbott’s generics business and shift its tax base to the Netherlands, some investors are speculating it could itself become a target for another stateside company looking for a tax inversion. But to that, Sanford Bernstein analyst Tim Anderson says they shouldn’t hold their breath.
The reason? Most of the company’s likely suitors don’t actually make that good a match, he wrote in a Tuesday note to clients. Take Pfizer, for example, which has been jonesing for a tax inversion since this spring’s failed play for British pharma giant AstraZeneca. Mylan will be too small to help the company complete one, Anderson notes, as foreign targets must be at least 20% of the buyer’s size.
And then there’s Teva, for whom the Mylan could be too large to swallow. With a market cap of $48 billion, Teva would need to make more than a couple significant divestments–like Epipen, which generates about 30% of Mylan’s profits–to afford the Pennsylvania drugmaker, whose own market cap is $22 billion, Anderson points out.
“Buying Mylan would mean the company will commit to a different direction than what it was apparently planning on,” he said.
If any interested buyers do go after Mylan, they’ll have to take heed of the company’s strategic plan to lift its share price to $73 by 2018–a 26% premium to its current price. “We do not see the board of the company accepting a lower offer,” he wrote.
Of course, “one should never say never about transactions,” he said, and that doesn’t mean both Pfizer and Teva won’t be pursuing other targets too–inversion or no inversion. Analysts figure Pfizer needs to make a move in the near-term, and some industry watchers think it could still come back and make another run at AZ. As for the Israeli generics behemoth, it’s been scouting for deals in the $10 billion to $15 billion range, Anderson says. Pickups could potentially help Teva toward its stated goals of widening its emerging markets footprint and becoming a biosimilars contender.
By Carly Helfand
