Mergers and acquisitions deals are a matter of strategy but also involve opportunism to a large extent - sometimes an opportunity crops up that begs to be seized. Recent developments in the pharmaceutical industry clearly demonstrate this.
Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) sought to acquire Mylan N.V. and invested substantial resources - both in money buying Mylan shares on the open market worth $1.6 billion and in financial consultancy and legal expenses, and management effort. And then just as Teva was about to make a binding offer for Mylan, up popped a better deal from Teva's point of view.
Allergan, which had formerly refused to sell its generics unit, decided to sell the division and focus on the branded drugs market., and as part of that process to spin off its generics activities. Teva was not "enamored" with the Mylan deal and the position it had adopted and chose to move on and buy Allergan's generics unit instead. At least, if the reaction of the stock market is anything to go by, it looks like Teva has made the right choice.
The capital market has been waiting for this transformational deal that will change the face of Teva. In 2014, when Erez Vigodman assumed the post of CEO, he took over a company in problematic circumstances with a share price at a low-point and limited confidence from investors.
In a conscious decision he decided not to get involved in mergers and acquisitions where deals costing billions and tens of billions had become routine. Vigodman preferred to focus on Teva's internal basics and only by the end of 2014 did he reach the conclusion that Teva was ready to dive into the deep water of mergers and acquisitions. Auspex Pharmaceuticals, which was acquired three months ago for about $3.2 billion was just the opening shot and the market expected more. The Mylan deal was meant to be the transformational acquisition but the resolute opposition of the Mylan board complicated the situation and Teva decided to give up on it despite its declarations of commitment to the deal. However, Mylan it seems did still make a major contribution to Teva's future growth because the bid for Mylan created the conditions for the deal with Allergan.
Teva's latest step has been received positively by the market with investors giving Teva and its management credit. In premarket trading in New York Teva's share price reached a record $70. This despite the major concern by investors of the black cloud hanging over Teva in recent years, which is now being realized in the form of generic competition for the company's flagship branded drug - Copaxone for the treatment of multiple sclerosis. Copaxone is responsible for about half of Teva's profit.
Every strategic step taken by Teva in recent years, including the current acquisition, has been designed among other things to reduce Teva's dependence on Copaxone. The division being acquired will consolidate Teva's leading position in the global generics market. Without an acquisition, Sandoz was expected to overtake Teva in generic sales in 2015, but this has now been averted.
Published by Globes [online], Israel business news - www.globes-online.com - on July 27, 2015
© Copyright of Globes Publisher Itonut (1983) Ltd. 2015