Since taking the helm at Teva early last year, CEO Erez Vigodman has expressed interest in bolstering several areas, including emerging markets, biosimilars and complex generics. But so far, he hasn’t inked any deals to help his company do it, and judging where his competitors now stand after a feverish year of pharma M&A, it’s high time to change that, analysts say.
The Israeli drugmaker has already watched Actavis, a generics rival, transform itself into a top 10 global pharma heavyweight through 2014 buyouts of Forest Labs and Allergan. And companies such as Merck, Shire and Valeant have all jumped into the deal melee, which has boosted their share prices, Bloomberg notes.
“Investors have seen what these deals are doing to the share prices” of its deal-minded peers, Gabelli & Co. analyst Kevin Kedra told the news service. “Teva has a healthy business, but in this environment if you’re not doing deals, you’re probably not taking advantage of the opportunities that are out there.”
Vigodman has said the company is ready to enter the M&A arena, and Teva could certainly use a boost as generics makers ready copies of its top-selling multiple sclerosis treatment Copaxone. The Petah Tikvah-based drugmaker has the means, too, Kedra told Bloomberg: Its leverage ratio is relatively low, and for the period ended in September, its net debt equaled just 1.6 times earnings before interest, taxes, depreciation and amortization. It had $1.5 billion in cash and equivalents, too.
So what’s been holding Teva back? The way Kedra sees it, the company may still have some decisions to make about the path it wants to take for its future. “Teva needs to figure out what it wants to look like five years from now, 10 years from now, because we still don’t have a clear picture as to what direction they’re going to move on deals,” he told Bloomberg.
Among the options: generics, respiratory, CNS or consumer health, where recent Omega Pharma-acquirer Perrigo ($PRGO) might make a good target. Sweden’s Meda, which itself grabbed Italy’s Rottapharm last summer, could also make sense, the news service notes.
And then there are the rumors surrounding a potential Mylan ($MYL) merger, which could help Teva strengthen its emerging markets footprint and beef up its core generics business. But some analysts aren’t buying into the buzz. As Bernstein analyst Ronny Gal told Bloomberg, the companies would have to make sizeable divestitures to reduce their overlap. And buying Mylan wouldn’t solve Teva’s Copaxone-inspired growth problems, Wells Fargo’s Michael Faerm wrote in an October note to clients.
By Carly Helfand