Teva Pharmaceuticals Industries Ltd., an Israeli-based drugmaker, is in advanced talks to acquire the generic drug business of Allergan Plc., according to a report from Bloomberg.
Teva, considered as the world's largest generic drug maker, has been looking to solidify its grip on the generic drug market. The company has been pursuing a deal to acquire Mylan NV, a rival in the generic drug market.
Reuters reported that Teva has offered to acquire Mylan for $40 billion. But the deal fell apart Mylan's independent Dutch foundation exercised its call option to purchase 50 percent of Mylan's issued and outstanding capital. The purchase gave the foundation temporary control of Mylan.
Teva's offer was rejected, as the foundation argued that Teva's takeover would result in job losses and reduce access to generic drugs in the market.
Reuters adds that should Teva acquire Allergan and drop its offer to purchase Mylan, the management of Mylan would strengthen its bid to acquire Perrigo Co. Plc.
Bloomberg reports that the deal was first mentioned by two people familiar with the matter. The source, who asked not to be identified because the information is private, said that the deal will most likely be in cash.
The source also said that talks could still fall apart.
Reuters adds that if the deal pushes through, not only will Teva have a bigger footprint in the generic drug market, it would also offer an opportunity for significant cost synergies and tax savings.
Elizabeth Krutholow, an analyst at Bloomberg Intelligence in New York, told Bloomberg that the timing is right for Allergan to consider selling its generic drug business.
"They may be able to command a significant premium given the recent interest in the sector," she said in an email to Bloomberg before talks were disclosed.
Krutholow adds that with Brent Saunders, CEO of Allergan, at the helm, the deal would make sense.
"With Saunders in charge, the company may lean more" on branded drugs "since that is his area of expertise," she said. "It's a more attractive growth area for the company."
