Eoin Treacy's view -
Allergan, which makes the blockbuster wrinkle treatment Botox, said Sunday it would buy the biotech company Naurex Inc., which is developing a fast-acting antidepressant. The $560 million all-cash transaction is expected to close by year-end.
Teva expects its Allergan transaction, which both boards backed unanimously, to close in the first quarter of 2016 and boost earnings per share. Also today, the company raised its earnings per share estimate for 2015 to between $5.15 and $5.40, up from an earlier forecast of $5.05 to $5.35. Earnings per share were $1.43 in the second quarter, Teva said.
Teva had been pursuing a $40.1 billion deal to buy Mylan since April, a merger rejected by Mylan management as culturally unfit. Last week, Mylan’s independent foundation exercised an option to acquire shares that let it control half of the company in a move that rendered Teva’s attempt to win over a majority of its shareholders much more difficult. Abbott Laboratories, Mylan’s top shareholder, in June said it backed Mylan’s plan to avoid being taken over by Teva.
Bloomberg reported on July 25 that Allergan was exploring a breakup of the company, including the possible sale of its generics business.
Mylan is pursuing Dublin-based Perrigo, a campaign that may now get fresh impetus as pressure mounts to become bigger. Perrigo, which makes prescription and over-the-counter drugs, has thus far rebuffed Mylan’s $33 billion offer.
Mylan will continue its pursuit of Perrigo and expects that Mylan shareholders will vote “in the next several weeks” to support a purchase, the company said in a statement. Perrigo shares rose 2.4 percent in premarket trading as of 6:55 a.m. in New York.
Teva, which had accumulated a 4.6 percent stake in Mylan ahead of a potential legal battle, said today it will “review its options” on the holding.
Teva may have a key advantage in integrating Allergan’s generic business because its own head of generics, Siggi Olafsson, formerly led that business at Allergan. Olafsson was brought in to Teva after leaving Actavis Plc, which switched its name to Allergan after agreeing to buy the maker of Botox in November 2014 for $66 billion.
M&A activity both within the pharmaceutical sector and the health insurance sector has accelerated this year and particularly over the last month. Increasing competition to capture market share has been given fresh impetus by the risk that ultra-low borrowing costs might not be on offer indefinitely and that a failure to act now will result in companies becoming targets themselves.
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