As I am sure you all know Teva has made a takeover bid for Mylan offering Mylan shareholders US$40 billion. I am equally sure you also know that Mylan has made a bid to buy Perrigo for about US$34 billion. Both these bids, Teva for Mylan and Mylan for Perrigo are unwelcome and not supported by the boards of Mylan or Perrigo respectively. This takeover dance has been going on for many weeks now without a lot of progress.
Last week there were US media reports that Allergan (the name of the Actavis/Allergan combined company) is looking at options to split its business, presumably spinning off or selling its generic assets. Over this weekend however there have been several media reports that in fact Teva is in advanced negotiation to buy the Allergan generic business for between US$40 and US$45 billion and that such a deal could be announced as early as this coming week. This then sets up a fascinating power play in the US generic industry.
If Teva acquired the Allergan generic business it would become more than twice as big as Mylan and put pressure on Mylan to “grow or die” as the saying goes. Also I would guess that if Teva does buy Allergan’s generic business they may not be able to proceed to buy Mylan due to antitrust concerns at the size of the prescription generic drug business that would result from a Teva/Allergan/Mylan combination. In addition to this three party tango there have been reports for some time now that Pfizer is also considering the future of its generic business.
For its part Mylan has apparently pulled the trigger on its “poison pill” strategy which hands majority voting control to an independent Dutch Foundation called Stichting. Teva is now headed to a Dutch court to challenge this move. If Teva does buy the Allergan assets they will probably abandon their bid for Mylan which could strengthen Mylan’s hand in trying to buy Perrigo (who are rumored to have approached Teva some time ago).
So what might all this mean? Well for one thing it means that the big US generic firms are getting fewer and bigger. Perhaps the most important thing for us is that it creates opportunity at the bottom of the industry for new generic entrants. As the firms at the top consolidate it reduces the number of major competitors and opens up opportunity for new competitors to enter the industry, which is after all built on competition. Perhaps as a side issue, it is amazing how much money is being thrown around in this era of zero interest rates. I remember when a billion US dollars was a lot of money, not now apparently, 100's of billions have been thrown around in pharmaceutical mergers and acquisitions in just the last year or so.
Whatever happens the next few weeks promise to be extremely interesting for those with an interest in the US generic industry. All this is happening in the traditional summer vacation, it's enough to make one wonder if interest rates are going to start rising once the summer vacation is over!!
