Teva Pharmaceutical Industries Ltd (NYSE: TEVA; TASE: TEVA) announced that it has signed a definitive agreement with Allergan plc (NYSE: AGN) to acquire Allergan Generics in a transaction valued at $40.5 billion. Upon closing, Allergan will receive $33.75 billion in cash and shares of Teva valued today at $6.75 billion, representing an estimated ownership stake in Teva under 10%.

Teva also announced that it has withdrawn its offer to acquire Mylan N.V. (NASDAQ: MYL) and does not intend to continue to pursue such a transaction at this time.

Large drug makers are trying to realign their operations to focus on a small number of leading businesses, while smaller specialty and generic producers are seeking larger scale. Allergan’s branded drugs business makes products such as Botox and Alzheimer’s drug Namenda. Its generics business makes up about a third of the company’s total revenue.

“This transaction delivers on Teva’s strategic objectives in both generics and specialty,” said Erez Vigodman, President and CEO of Teva. “Through our acquisition of Allergan Generics, we will establish a strong foundation for long-term, sustainable growth, anchored by leading generics capabilities and a world-class late-stage pipeline that will accelerate our ability to build an exceptional portfolio of products – both in generics and specialty as well as the intersection of the two. Our respective portfolios of generic medicines and applications are highly complementary, providing Teva with high quality growth and earnings visibility, and the scale and resources to expand upon our specialty capabilities.”

Mr. Vigodman continued, “Given our in-depth knowledge and understanding of Allergan’s world-class generics business, we are confident we can realize the projected synergies and accretion inherent in this acquisition for our stockholders and integrate Allergan Generics quickly into Teva. With pro forma revenues of approximately $26 billion and combined EBITDA of approximately $9.5 billion anticipated in 2016, this acquisition reinforces our strategy, accelerates growth and diversifies revenues both by product and geographically, supporting our new business model. I strongly believe that as a result of our strengthened financial profile following this transaction, we will be even better positioned to reap the benefits of Teva’s integrated, innovative specialty and generic research to support top-line growth and expand our portfolio across the business.”

Mr. Vigodman concluded, “This acquisition comes at a time when Teva is stronger than ever, in both our generics and specialty businesses. Since the beginning of 2014, we have significantly strengthened the fundamentals of our company, improved generics profitability, solidified our key franchises and put in place robust engines for organic growth, laying the groundwork for transformative transactions such as this one. This transaction is another step forward on our roadmap to reinforce our already strong position. Teva and Allergan Generics share a commitment to innovation, quality, and improving the health of people around the world. Together, the employees of Teva and Allergan Generics will play a critical role ensuring we capture the full potential value resulting from this transaction. We look forward to delivering the benefits of this transaction to our stockholders, and better serving patients, customers and healthcare systems throughout the world.”

Prof. Yitzhak Peterburg, Chairman of the Teva Board of Directors, said, “This acquisition will result in significant and sustained value creation for our stockholders, reinforces our strategy, accelerates the fulfillment of a new business model, strongly supports top-line growth and opens a new set of possibilities for Teva. Together with Allergan Generics, Teva will have a much stronger, more efficient platform to achieve our goals – both financially and strategically – with the right platform for future organic and inorganic growth.”

This strategic acquisition brings together two leading generics businesses with complementary strengths, brands and cultures, providing patients with more affordable access to quality medicines, and creating significant financial benefits for Teva stockholders. The transaction will create a leader in the INN and branded generics industry with an overall product portfolio that leads the industry in terms of differentiation and durability and offers promising growth opportunities. The new Teva will further transform the global generics space through its best-in-class generics pipeline, R&D capabilities, operational network, supply chain, global commercial deployment and infrastructure to achieve greater efficiencies across the healthcare system and provide patients and consumers across the globe with better access to high quality affordable medicines.

When combined with Teva’s strong generics portfolio, Allergan Generics’ world-class generics pipeline, which holds a leading position in first-to-file opportunities in the U.S., will further enhance Teva’s goals of delivering the highest quality generic medicines at the most competitive prices and cultivating the best development pipeline in the industry. The resulting world-class product portfolio will be complemented by a significantly expanded and more efficient global footprint, including leadership positions and strengthened operations, sales and R&D platforms in attractive markets around the world. In addition, Teva expects to enhance its financial profile significantly with highly diversified revenues and profits and to unlock substantial, achievable cost synergies by eliminating duplication and inefficiencies on a global scale and capturing economies of scale.

Substantial Financial Benefits

The transaction is expected to provide substantial financial benefits for Teva including highly diversified revenues and profits, and substantial cost synergies and tax savings. Teva expects Allergan Generics to contribute approximately $2.7 billion in EBITDA in 2016, excluding synergies. Following the completion of the acquisition, Teva is expected to have pro forma sales of approximately $26 billion and EBITDA of approximately $9.5 billion in 2016, including an estimated $11 billion in sales outside of the United States. Teva also believes the acquisition will be significantly accretive to non-GAAP EPS, including expected double digit non-GAAP EPS accretion in 2016 and more than 20% accretion in year two and year three following the close of the transaction.

Teva expects to achieve cost synergies and tax savings of approximately $1.4 billion annually, largely achievable by the third anniversary of the closing of the transaction. Teva expects the savings to come from efficiencies in operations, G&A, manufacturing, and sales and marketing.

Teva expects the acquisition to generate strong free cash flow of approximately $6.5 billion in 2016 and expects increasing free cash flow in subsequent years. Teva’s free cash flow will allow for rapid deleveraging and the ability to continue to pursue future acquisitions to expand Teva’s portfolio in both specialty pharmaceuticals and generics, in line with Teva’s stated strategy to grow through value-enhancing and complementary acquisitions.

Enhances Teva’s Integrated Business Model through Unmatched R&D Capabilities and Technology

Teva will have the most advanced R&D capabilities in the generics industry, directed at fostering innovation, with approximately 320 combined pending ANDAs in the United States, including exclusive offerings of approximately 110 U.S. FTF pending ANDAs.

Teva is well positioned to capture untapped opportunities for greater integration and innovation between generics and specialty assets with a single, powerful and differentiated offering. Teva will possess the capabilities and technologies to focus on complex generics, biosimilars and specialty products in our key therapeutic areas, delivering better value and accessibility, while improving adherence and compliance. Allergan Generics’ strategically focused R&D engine is built on novel compounds in specialty and primary care markets where there is significant unmet medical need. With its existing integration of generics and specialty, Teva will be able to generate a robust pipeline of high-value medicines, with an emphasis on complex and branded generics, focused on the needs of patients and the people who care for them.

Teva’s generics R&D is closely integrated with its extensive clinical expertise in developing specialty products. This transaction will afford Teva unrivaled speed and flexibility, creating a company well positioned to transform the growing global generics space in markets throughout the world, delivering even greater value to patients and stockholders, as well as to healthcare systems around the world, and improving adherence and health outcomes in general. The result is a company well positioned to ensure product development activities that support sustainable long-term organic growth.

Bolsters Promising Specialty Pipeline

Teva has multiple existing specialty pharmaceuticals at various stages of development, which are expected to drive sustainable growth in its specialty business. In particular, Teva is committed to building global leadership in its core specialty franchise including in central nervous system, pain and migraine and respiratory. The enhancements that will come from scale and broader capabilities through the acquisition of Allergan Generics will provide the resources to further enhance investment in these franchises. Building on the broadest portfolio of products and technologies in the generics industry, and on a leading position in specialty, Teva will continue to strengthen its pipeline by developing novel products based on known molecules that bring unique value to patients.

Increases Global Commercial Reach

Teva’s acquisition of Allergan Generics will improve international commercial opportunities by positioning Teva to significantly enhance the global scale of its sales and R&D platforms. Together, Teva and Allergan Generics will have a commercial presence across 100 markets, including a top three leadership position in over 40 markets.

The acquisition will help eliminate inefficiencies and duplications in the global generics space and will allow Teva to better focus resources and efforts in complex generics, biosimilars and specialty products in key therapeutic areas. This scale and breadth of operations will provide Teva with an even more efficient, flexible and competitive global platform with industry-leading go-to-market capabilities.

Teva Pharmaceutical Industries Ltd. is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions to millions of patients every day. Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,000 molecules to produce a wide range of generic products in nearly every therapeutic area. In specialty medicines, Teva has a world-leading position in innovative treatments for disorders of the central nervous system, including pain, as well as a strong portfolio of respiratory products. Teva integrates its generics and specialty capabilities in its global research and development division to create new ways of addressing unmet patient needs by combining drug development capabilities with devices, services and technologies. Teva’s net revenues in 2014 amounted to $20.3 billion.



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