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Teva Will Acquire Allergan’s Generics Business

Pharmaceuticals: $40.5 billion deal will create a top-10 drugmaker

by Michael McCoy
July 27, 2015

Credit: Shutterstock
Teva’s purchase of Allergan’s generics business will vault it into the pharmaceutical top 10.
Stock photo of generic drugs.
Credit: Shutterstock
Teva’s purchase of Allergan’s generics business will vault it into the pharmaceutical top 10.

Teva Pharmaceutical Industries has abandoned its planned hostile takeover of Mylan and struck a new deal in its place: the friendly purchase of Allergan’s generic-drug business for $40.5 billion.

The deal is the latest in a string of actions that are shaking up the generic and specialty pharmaceutical sector. Allergan is the product of the combination of Allergan and Actavis, a $66 billion deal that was completed only in March. And Mylan, no longer being pursued by Teva, says it remains committed to its $29 billion hostile attempt to buy generics rival Perrigo.

Allergan’s generics business, part of the old Actavis, had $6.7 billion in sales last year, roughly two-thirds of which were in North America. Teva says the purchase will bring its annual sales to $26 billion, making it the world’s ninth-largest drug company and the only firm in the top 10 to be largely focused on off-patent drugs.

According to Teva, the generics sector is ripe for consolidation. In a presentation delivered to investors after the deal was announced, Teva executives noted that the firm’s top three customers—CVS, RiteAid, and Walgreens—accounted for 83% of U.S. generics sales in 2013, up from 52% in 2009. But over roughly the same period, the combined U.S. market share of the top three generic-drug makers actually declined to 28% from 31%.

Teva says the purchase will allow it to create the most advanced R&D group in the generics industry with capabilities in areas including complex generics, biosimilars, and specialty products. At the same time, the Israeli company expects to reap $1.4 billion in annual cost savings within three years of completing the deal.

For its part, Allergan says selling its generics business will allow it to sharpen its focus on more innovative drugs. Just one day before it agreed to sell the generics business, Allergan announced the $560 million acquisition of Naurex, an Illinois-based firm developing drugs to treat depression.

But in a sign that it is not interested in basic research, Allergan says it will spin off Naurex’s drug discovery operation into a new company with which it will collaborate.—Contributor Name



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