Mylan has shrugged off the disappointment of its failed bid for Perrigo with a $7.2bn deal to merge with Swedish pharma company Meda.
Adding Meda to its portfolio boosts Mylan's range of branded and generic pharmaceuticals but also gives it a significant leg-up in the market for over-the-counter (OTC) medicines, albeit not as large as would have been forthcoming with the proposed $26bn Perrigo deal.
After the deal goes through, the Mylan/Meda OTC business will have sales of around $1bn per year, a sizeable tally in a market that despite consolidation remains highly fragmented. OTC medicines have become an attractive area of the pharma industry as their growth has outstripped the prescription drug sector, mainly driven by emerging markets.
The new agreement is valued at $9.9bn - if one includes the assumption of Meda's debt - and at 165 Swedish kroner per Meda share, this represents a 90%-plus premium on the firm's share price before the deal was announced.
The hefty price tag has raised some eyebrows among analysts, but there was also acknowledgement that Meda's key products - including allergy therapy Dymista (azelastine/fluticasone) and Elidel (pimecrolimus) for dermatitis and eczema - would benefit from Mylan's greater international scale.
Meda's board of directors unanimously backed the takeover, saying in a statement that it is "strategically merited in a rapidly consolidating market" and there would be mutual benefits towards growth in emerging markets.
The deal reduces Mylan's reliance on generic drugs with the addition of specialty brands that are less prone to pricing pressure and competition.
The combined company will have collective 2015 sales of approximately $11.8bn and adjusted earnings before interest, depreciation, taxes and amortization (EBITDA) of around $3.8bn, with the opportunity to save around $350m in pre-tax costs within four years.
Mylan has been in pursuit of Meda for some time, having had two offers for the company rejected in 2014, which at the time were valued at up to $6.7bn.
"Since 2014, the rationale for this combination has only been further enhanced by Meda's acquisition of Rottapharm and our acquisition of EPD, with the ability to leverage this infrastructure especially in Europe and emerging markets", said Mylan chief executive Heather Bresch on a conference call yesterday.
"We're gaining a more balanced and expanded global footprint with an even stronger presence across Europe, a leading US specialty business, and an expanded presence in emerging markets", she added.
Adding Meda enhances Mylan's presence in attractive markets such as China, Southeast Asia, Russia, the Middle East and Mexico, said Bresch.
The deal was announced at the same time as Mylan reported its fourth-quarter 2015 results, including fourth-quarter revenue up 20% to $2.5bn, around $200m shy of analyst expectations.