Sector News

Ready for a Teva-Mylan scrap? It’s here. Teva finally launches its $40B takeover bid

April 22, 2015
Life sciences
The rumors are true: Teva does indeed have eyes for Mylan. And after months of speculation, its bid is here.
 
The Israeli company Tuesday proposed an $82-per-share buyout, split 50/50 between cash and stock–an offer CEO Erez Vigodman called “compelling” for both Teva and Mylan stockholders.
 
A combined company would create a generics superpower, Teva figures, with a pipeline of more than 400 pending generic drug applications at the FDA. That includes more than 80 first-to-files, which can give one drugmaker a lock on generic sales for 6 months after a patent expiration.
 
Together, Teva and Mylan would also boast advanced manufacturing technologies that deliver hard-to-produce drug formulas, not to mention the globe’s leading API division, the Israeli company says.
 
And don’t forget specialty drugs: Between them, the two drugmakers could show off a $10 billion business in that department, with leading positions in multiple sclerosis, respiratory, pain, allergy meds and other areas.
 
All told, Teva believes it would be looking at mid-single-digit top-line growth, more than $30 billion in revenue, and EBITDA exceeding $10 billion come 2016–assuming Mylan agrees to tango. On top of that, Teva says it can squeeze out $2 billion in savings on annual costs and taxes, most of it within three years.
 
Those savings would be possible partly because the companies’ businesses overlap significantly. A boon for cutting costs, but as some analysts–and Mylan Chairman Robert Coury–have pointed out, that overlap might thwart regulatory clearance for a deal.
 
Not so, Teva says: It “carefully studied” the regulatory aspects of a tie-up, and it’s confident it can structure a transaction to meet regulators’ approval.
 
For Teva, it’s the big jump into M&A action that industry watchers have been waiting for ever since Vigodman took the helm early last year. With generic challengers champing at the bit to get a shot at lead product Copaxone, Teva is in need of some top-line assistance. And it has promised a renewed focus on the generics business that was once its bread and butter.
 
But Mylan will be a tough sell. The company recently set in motion a poison pill plan–designed to block unwanted takeovers–and Friday, Coury unequivocally opposed a Teva merger. In a statement, Coury said a match between Teva and Mylan “is without sound industrial logic or cultural fit.” Mylan is committed to a standalone path, he said–which includes pursuing its $29 billion bid for Ireland’s Perrigo.
 
Vigodman doesn’t see it that way. “[A] combination of Teva and Mylan is a much more attractive and value-creating alternative for Mylan and its stockholders than Mylan’s proposed acquisition of Perrigo,” he wrote in a Tuesday letter to Coury.
 
As for the cultural differences Coury mentioned? Not a problem, from where Vigodman’s standing.
 
“Both Teva and Mylan have achieved their respective goals through innovation, vision and a commitment to quality,” the CEO said in a Tuesday statement. “Mylan’s business is a natural fit with our own and is highly complementary to it–and bringing together our two companies would not only deliver the greatest value for our financial stakeholders, but also enable us to better serve patients, customers and healthcare systems throughout the world.”
 
By Carly Helfand
 

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