The world’s largest generic drug manufacturer Teva has bought Botox-maker Allgeran’s copycat medicines unit for more than $40bn.
The Israeli firm will pay Allergan $33.8bn in cash as well as including shares of Teva, which are valued at $6.8bn – taking the total deal to $40.5bn.
Allergan will as a result own around 10% of Teva, while in return the firm will gain full access to the Botox maker’s generics business, which boasts around 1,000 products.
Teva said in a statement that its purchase of Allergan’s unit will see the firm end its long-term pursuit of the generics company Mylan, which it has this year been attempting to buy for $40bn.
Mylan has however fought to stop any attempted takeover – this latest deal has seemingly been a lot smoother for Teva and Allergan, and removes the need for a protracted and hostile deal against Mylan, the pursuit of which had hit Teva’s shares given the ongoing uncertainty.
Allergan’s generic business is also seen by analysts as a better fit for Teva than its original target Mylan.
This is because it can improve Teva’s distribution channels while Allergan also has a strong biosimilar pipeline, as well as injectables, and has a presence in India – all elements that can help Teva grow in the future.
Investors have been pressuring Teva to make a major deal as generic erosion will now decimate the annual $4.2bn sales the firm was enjoying from its multiple sclerosis drug Copaxone (glatiramer acetate).
The drug lost its patent in the US earlier this year, where it makes around three-quarters of its sales. Although a generics drugmaker, Copaxone makes up a substantial percentage of its annual sales, but there is as yet no other patented medicine from the firm lined up to bring in this level of revenue.
In March, Teva announced a $3.5bn agreement to buy central nervous system therapy specialist Auspex, but investors had been pushing for a bigger, more transformative merger deal to help with the erosion of Copaxone’s revenue. Teva shares jumped 10% in Tel Aviv on the news.
Teva said in a statement that through this acquisition, it expects to “enhance its financial profile significantly with highly diversified revenues and profits and to unlock substantial, achievable cost synergies”.
Erez Vigodman, president and CEO of Teva, said: “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.
“Our respective portfolios of generic medicines and applications are highly complementary, providing Teva with high quality growth and earnings visibility, and the scale and resources to expand upon our specialty capabilities.”